The Chartered Trading Standards Institute has issued new guidance on pricing practices for businesses who sell products to consumers in the UK.
The "Guidance For Traders on Pricing Practices" ("Guidance") replaces the former 2010 BIS Pricing Practices Guide (the "2010 Guide"). The publication of the Guidance has been prompted by a recent series of consumer complaints focused on misleading practices, and a super-complaint from the Consumer Association 'Which?'.
Who does the Guidance apply to?
The Guidance applies to businesses who sell goods or services to UK consumers, irrespective of the sales platform (e.g. bricks-and-mortar stores or online e-commerce websites). Whilst the Guidance does not itself have legal force, it illustrates the likely approach that will be taken by Trading Standards and other authorities when enforcing the various underlying pieces of consumer protection law, most notably the Consumer Protection from Unfair Trading Regulations 2008 (the "Regulations"). Although the underlying legislation itself has not changed, the revised Guidance includes several new and expanded areas of information to assist traders in complying with that legislation.
Key Provisions of the Guidance
The fundamental guiding principle of both the former 2010 Guide and the new Guidance is that pricing practices must not be unfair or likely to deceive consumers. However, the new Guidance signals a change in approach, in that it moves away from setting down hard-and-fast rules, to a regime whereby traders should consider the likely effect of a pricing practice on consumers and evaluate whether they would find it misleading.
Key areas of the Guidance include:
- Pricing Promotions: The Guidance provides some useful examples of practices that could be deemed to be providing false information about the price or how it is calculated. It also sets out a list of issues that traders should take into account when considering whether their price promotion is fair. This is a good illustration of the change of approach between the 2010 Guide and the new Guidance. For example, the 2010 Guide stated that a price used as a basis for comparison should be the trader's most recent price, and should have been available for 28 consecutive days or more. The Guidance now sets out a list of issues for traders to consider in order to help them evaluate the fairness of the comparison (e.g. "How recently was the higher price offered compared to when the price comparison is being made"), together with practical examples of behaviour which is "more likely to comply" or "less likely to comply" the legal requirements.
- Recommended retail prices ("RRPs"): Traders' use of RRPs has come under scrutiny in recent years, with claims that they are frequently used misleadingly. The Guidance advises that if using RRPs, traders should consider obtaining substantiation from their suppliers or manufacturers that the RRP represents a genuine selling price.
- Comparison against a competitor's pricing: The Guidance emphasises that any comparison against a competitor should be objective rather than subjective. In particular, it highlights that traders should not make general claims that give the overall impression that all of their products are cheaper than a competitor's if that is only true for selected items, and that traders keep clear documentary records of any price comparisons made against a competitor’s price.
- Online sales information: E-commerce has grown significantly since 2010 when the previous guidelines were issued. Whilst price comparisons for an in-store product may be made against a product sold in different circumstances (such as online), the Guidance states it is important that any material differences in the circumstances are communicated to consumers in a way that is transparent, fair and prominent. The Guidance also states that where a website requires consumers to take extra steps, such as clicking on a link or scrolling down a page, to obtain material information (such as additional costs), it may amount to an unfair practice.
- Volume offers: The Guidance emphasises that traders should not advertise volume discounts unless the consumer is genuinely receiving better value as a result, and warns that offers that omit material information or are confusing (e.g. because it is difficult for a consumer to calculate the actual saving) are at risk of being unfair.
- "Free" items: The Guidance reminds traders that they must not use the term ‘free’, or similar phrases, unless the consumer pays nothing other than the unavoidable cost of responding to the offer and collecting or paying for delivery of the item.
- Additional charges: The Guidance reinforces the position under the Regulations that compulsory charges should be included in the up-front sales price. It also reflects other recent changes in consumer legislation, including the prohibition on applying credit or debit card charges which exceed the cost of the equivalent fees charged to the trader, and the use of pre-ticked tick boxes to secure consumer consent to additional fees or charges.
It is expected that enforcement authorities are likely to give traders until April 2017 to adjust to the Guidance. Traders should start to review their pricing practices for compliance with these new guidelines, which potentially signal a significant shift in the way in which the enforcement authorities will monitor compliance with consumer laws in this area.