Comment: OFT goes on the offensive on pricing practices
Retailers be warned! The Office of Fair Trading's originally relatively low-key review of the current Pricing Practice's Guide, published in 2010 by the Department for Innovation & Skills, has now seemingly become an all-out offensive. By Gavin Matthews, head of retail at Bond Dickinson.
The OFT's latest, somewhat aggressive, announcement issued on the Friday before the August Bank Holiday has put the issue of pricing practices well and truly back in the spotlight.
The open and very public declaration that six major furniture and carpet retailers are being investigated by the OFT in relation to alleged false reference pricing practices comes hard on the heels of the recent prosecution of Tesco's over its "half-price" strawberries, an incident which resulted in a £300,000 fine being handed out by Birmingham Crown Court.
The full price that the offer referred to had been available for only two weeks, with the lower price being available over several months. Whilst this offence was committed in 2011, well before the agreement signed up to by 8 supermarkets (including Tesco's) with the OFT in November 2012, nevertheless, the timing of the conviction coupled with the OFT's latest action, means that consumer confidence has been shaken once more.
The OFT has been expressing concerns over the current BIS pricing practices guide for some time. The latest action follows the OFT Advertising of Prices Study in 2010, and its investigation into supermarket pricing last year which addressed concerns over promotional claims on food and drink prices. That investigation was followed by discussions with the leading supermarkets, culminating in an agreed set of principles covering internal reference pricing, price establishment, reference to previous selling prices and pre-printed value claims on packs.
The OFT's view is that the guide needs re-writing for the benefit of consumers, with particular concerns around drip pricing, bait pricing and false close claims, as well as reference pricing. Earlier this year it began seeking informal views from retailers on the current guide with the intention of strengthening and clarifying existing guidelines, with the stated intention of going out to consultation later this year. It is also likely that any revised guide will include services pricing (e.g. installation/fitting costs).
There now appears to have been a major step-change in the OFT's approach. This latest saga is no doubt the OFT's attempt to pressurise the furniture retailers concerned into agreeing a similar set of principles and it will be interesting to see what the OFT takes in terms of actions against these and other retailers. We expect to see more concerted effort by the OFT for the rest of the year on the wider pricing practices issues, so retailers should keep a very close eye on developments in the coming weeks.
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