Important new guidelines for advertising prices to UK consumers
17 March 2017
The long-awaited Guidance for Traders on Pricing Practices was finally issued by the Chartered Trading Standards Institute (CTSi) in December 2016. The previous guidelines had been around since the old DTI published its first Code of Practice in 1988, with the last iteration published by the Department for Business, Innovation and Skills (BIS) in 2010. Although the BIS guidance has been withdrawn, traders have until April 2017 to comply with the new Guidance. The Guidance will apply to any advertisers targetting UK consumers, including advertisers based abroad.
What are the key changes from the old guidelines?
The new Guidance adopts the principles-based approach that underpins the main underlying legislation, the Consumer Protection Regulations 2008 (CPRs). This is a triumph for a more flexible approach in deciding whether a pricing practice is misleading. The old formulaic approach enshrined over the years since 1988 gradually led to practices that were compliant with the letter of the guidance, but increasingly at odds with the principles of the CPRs. However, this more flexible approach has come at the cost of certainty, as illustrated by the two areas below.
No more 28 day ‘price establishment’ for reference prices
The first key change is in the use of “reference prices” when making a savings claim. It has become common practice for traders to “establish” reference prices immediately before a sale by increasing their prices for 28 days and then starting their sale. This enabled them to follow the old guidance, which stated that traders could compare their sale prices with an earlier, higher reference price, provided that (a) the reference price was the last price applied; (b) the new lower price did not apply for so long that the comparison became misleading; and (c) the old reference price had applied within the preceding 6 months.
In 2010 the BIS guidance required that the reference price had to be “genuine”. In other words, the trader had to have a reasonable expectation of selling the goods at the higher price and had to place them on the market in sufficient numbers and for a sufficient period for the offer at the higher, reference price to be genuine.
Nevertheless, following consultation, the Competition and Markets Authority (CMA) concluded that, while traders may well have been complying with the letter of the guidance on the 28-day rule, they were not complying with the principle of the CPRs. The old rule has therefore been expunged and now traders must ensure that the “average consumer” would not consider the savings claim to be misleading or unfair. Despite this ambiguity, the Guidance provides a useful steer in the form of the following 5 questions...