Pricing Practice Guide 2015 what does it mean for retailers?
The retail sector has seen several high-profile consumer protection cases over recent years, including the Which? super-complaint. Consumers lead busy lives and are subject to an increasingly wide range of products and sophisticated marketing so it is important that businesses fully understand their responsibility to ensure that any information presented to consumers that attempts to affect their transactional decision is clear, accurate and meaningful.
The revised PPG is significantly different from the existing guide and will likely have a direct impact upon the way businesses approach pricing promotions. The key change is a shift from a prescriptive to a principles based approach. The result is that some of the well established guidelines are gone. This includes the "28 day rule" in respect of establishing a reference price for "Was £20, now £10" type promotions, and the guideline that at least 10% of promotional items must be available at the advertised discount (e.g. "up to 40% off sale").
The new guidelines have also seen the removal of the old six month criteria for "new" claims which again is likely to cause issues as businesses work out how long, based on the particular product and market, a price could be considered new. This will be particularly difficult to monitor for businesses that sell a lot of products and/or have a high turnover of seasonal and/or new stock.
The industry will also welcome the one click rule finally being acknowledged as a valid route to qualifying a claim in the digital space although we are concerned that there may be a belief that a banner ad can say anything, providing it’s qualified at the click through.
There does, however, remain a certain level of uncertainty surrounding several key points. An example of this can be found in the section on footnotes where option three suggests that it is acceptable to list disclaimers, specific conditions and exclusions in small print. This is likely to cause confusion because such an approach is not always going to be acceptable, for example where a headline might state "£50 off", but the small print might specify "Min spend £750". The minimum spend is a condition that would be deemed to be so significant that it warrants inclusion within the headline itself. The guidelines do not explain what a contradictory footnote would look like.
Additional questions also remain surrounding the guidance talking about "deploying strategies that make it easy for the consumer to find and understand additional text" without giving an example. Why not just say "Use an asterisk to indicate that additional information applies"? This only makes the guidance unclear.
Specifically addressing reference pricing, it is likely that marketing teams will need guidance in respect of questions such as; has the product been charged at the higher price for a sufficient period of time?; is the previous higher selling price a realistic one?; how may sales will be deemed sufficient?; has the product been sold at a sufficient number of stores?; what if it’s normal for the price to frequently fluctuate?; what happens if the product has previously been on sale?; what about if it's been discounted online only?
There is also concern that without clear guidance in respect of such issues, the message that the "28 day rule" has gone could well result in misleading reference pricing. The risk of enforcement action will significantly increase, especially as the CMA and ASA are likely to be proactively monitoring compliance in the months following the publication of the revised PPG.
In the case of complaints made to the ASA, it's also likely that the prospect of having the issue resolved informally will be reduced if no clear and appropriate parameters are in place to ensure compliance. In practice however, the approach taken in the new PPG is likely to offer little practical assistance to those creating and approving pricing promotions. Businesses will therefore need to develop their own guidance to ensure that their marketing teams fully understand what is and what is not acceptable from a consumer protection law perspective.
It is imperative that consumers are able to trust the information that businesses provide about their goods and services and must to be able to make fair comparisons between them and other businesses in the sector. Those businesses who trade fairly can expect to generate loyal consumers who bring repeat purchases over many years. Those who do not can expect to have to deal with complaints and may face criminal and civil investigation, risk damage to their reputation and financial penalties.
The proposed Guidance should encourage businesses to review all pricing practices and reassess their fairness, but businesses should seek advice if they are unsure what the law expects of them.
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