New guidance for retailers on pricing practices
Details
The Chartered Trading Standards Institute (CTSI) has published new guidance for retailers on pricing practices. The Guidance for Traders on Pricing Practices (the guidance) replaces the 2010 Pricing Practices Guide produced by the then Department for Business, Innovation and Skills (BIS). It has been designed specifically to assist traders in making decisions about their pricing practices, and provides an overview of consumer protection laws relating to pricing and associated practices for traders.
The guidance was produced at the request of the Department of Business, Energy and Industrial Strategy (BEIS) and the Consumer Protection Partnership, driven by a succession of recent consumer complaints relating to misleading and confusing pricing practices, including a ‘super-complaint’ from the consumer association Which? in April 2015. The complaint was investigated by the Competition and Markets Authority (CMA), who found that, whilst misleading practices were not widespread, new guidance was needed to clarify for retailers how the relevant legislation applies to promotional pricing practices.
The guidance therefore aims to provide helpful advice to traders on compliance with consumer protection legislation, the main principle being that promotions ‘should not in any way mislead, deceive or take advantage of consumers’.
But what does it mean for retailers?
The guidance applies to anyone who regularly sells or engages in the process of selling products to UK consumers. It covers all consumer goods and services and all platforms used for business to consumer selling. The guidance focuses on the obligations required by the Consumer Protection from Unfair Trading Regulations 2008 (the Regulations), however, the guidance itself is not statutory – the courts are not bound to accept it but it will be strongly persuasive, and it is certain to be referred to by courts and regulators alike when making enforcement decisions about a pricing practice.
The guidance is in a much more accessible format than its predecessor. It is more visual and user-friendly; it is well laid out and gives colourful examples which are helpful for both traders and consumers. The guidance focuses on the behaviour of the average consumer, who is defined in the Regulations as a person who is ‘reasonably well-informed, reasonably observant and circumspect’. Practical examples of good practice are provided, together with examples of when a practice is likely to be held to be misleading and the consequences of getting it wrong.
Detail on the guidance
The guidance moves away from the old approach of establishing clear and specific rules to a structure which takes a principles-based approach. In essence, the retailer bears the burden of deciding whether the pricing practice is compliant with the guidance or not. Whilst this will provide greater flexibility for those incorporating more modern pricing practices, this new approach may lead to questions in respect of perceived ‘grey areas’ and may raise some uncertainty over what is and is not acceptable. However, the new guidance emphasises the importance of considering the circumstances of each case.
There are several important new or revised guidelines, examples of which are:
- Reference prices
Previously a product had to be on sale at the higher price for at least 28 days before a saving could be claimed against a reference price, but this rule is absent from the new guidance. This does not necessarily mean that 28 days will no longer be sufficient, but the guidance suggests it is likely to be fair only if the discounted price does not apply for a longer period than the higher price. - Use of recommended retail prices (RRPs)
Where the price comparison is based upon a recommendation from a manufacturer or supplier, retailers should take extra care. They should consider obtaining substantiation from their suppliers or manufacturers that the RRP represents a genuine selling price, and make it abundantly clear that the price is an RRP rather than the retailer’s own previous price. Where the comparison is against a competitor’s price rather than the RRP, it must be objective, and retailers should ensure that the information remains up to date so as to remain fair for the consumer. - Volume offers
The guidance suggests that retailers should not advertise volume discounts (for example, combination offers or multi-buys) unless the consumer is genuinely receiving better value. They are more likely to be misleading if it is difficult for the consumer to actually calculate the saving they are getting. - ‘Up to x% off’ and ‘from’ claims
Previously, these types of pricing methods could be used as long as the claim applied to at least 10% of the products on offer; however the guidance now states that these offers can only be used if the maximum price reduction stated applied to a ‘significant proportion’ of the range of products in the promotion. Whilst unstated, this is likely to mean a largely proportion of the products than before. - Card charges
There is an express prohibition on applying credit/debit card charges which exceed the cost of the equivalent fees charged to the retailer.
Advice for retailers
The legislation has not changed, and it must still be complied with. Enforcement authorities are giving traders until April 2017 to adjust to the new guidance. This is an ideal time for all retailers to review their pricing practices for compliance and reassess their fairness and effectiveness.
Retailers should, at the very least, ensure all information given to the consumer is accurate and retain evidence of how price communications are conveyed to consumers and the evidence which is the basis of any price comparison.
It appears that ultimately it is for each retailer to make an assessment as to whether their practices are fair, and retailers are therefore encouraged to develop their own internal guidelines to ensure consistent compliance and assist the overall marketing process.
