For a limited time only – the new guidance for traders on pricing practices
Thursday 8th December 2016
Mark Jones, food and drink expert at Gordons, explores the changes to pricing guidance to increase clarity and prevent misleading trading.
New guidance on pricing practices was published on December 7 to prevent the misleading and confusing pricing tactics used by some retailers.
The Guidance for Traders on Pricing Practices, by the Chartered Trading Standards Institute, replaces the former Department for Business Innovation and Skills Pricing Practices Guide.
Although the law has not changed, the new guidance updates previous documentation published in November 2010, following the Which? super-complaint in 2015, and many organisations will be directly affected.
The following is a breakdown of what has changed, what has stayed the same, and how it will affect you and your business:
There are two notable changes. First of all, there are more pictures in the new guidance, and it also removes the references to specific time frames.
Why is it important?
If a business breaches the regulations, civil and criminal proceedings can be brought against it. If a company is found guilty of an offence, that company can be subject to an unlimited fine. An officer or manager of a company who consents to – or acts negligently in relation to – the offence can be found personally liable, fined or face a two-year prison sentence.
Crucially, if the business is found to be misleading consumers, there is a good chance its reputation could be damaged and any trust that consumers have in the brand may be lost.
What is covered?
Before rushing through the key points, it should be noted that the guidance runs to 25 pages. This note is a snapshot of what retailers need to know.
The new guidance is not the only piece of legislation businesses dealing with consumers need to think about. Depending on the sector in which the business operates, there may be sector-specific legislation such as the Consumer Rights Act, Consumer Credit Act, The Estate Agents Act, Regulations relating to Package Holidays, the Price Marking Order 2004 and others.
- The key requirement is to formulate pricing practices in accordance with honest market practice and general principles of good faith
- If pricing practices are challenged, the business should have evidence of:
- How price promotions are communicated (i.e. price labels, signs, notices, oral, newspapers, magazines, flyers etc)
- Terms and conditions and evidence of how they were communicated to consumers
- The stock and availability of the product and prices at which the products were sold
- Competitors’ prices (e.g. website screenshots), when comparing competitor products as a record of how comparisons were established
- Do show total prices inclusive of all taxes
- Do show additional charges with price
- Do include compulsory fees
- Do show unit prices
- Don’t charge a fee for using a credit card/debit card that exceeds your own costs for providing the method of payment
- Don’t use a default option (i.e. pre-ticked box) to obtain a consumer’s consent for additional charges
- Don’t use statements like “all or everything” unless the statement is true
- Don’t advertise products you don’t have at a specific price
- Don’t advertise a product at a price and then attempt to persuade a customer not to buy it
- Don’t falsely state a product will only be available for a particular price upon particular terms for a short period of time
- Don’t claim you are about to cease trading if you are not
- Don’t describe products as free if they are not
- Don’t advertise ‘bigger pack, better value’ if consumers can buy other pack sizes at a lower price
- When comparing competitor prices you must change them quickly if you become aware the competitor’s price has changed
- Make sure offers are clear and that additional information is not needed to understand the offer. In other words, do not have lengthy small print which includes important conditions and exclusions. Any exclusions or conditions should be prominent and easy to understand
- If selling online, ensure all costs appear in the same place so consumers don’t need to scroll down the page or click onto other pages to see any additional charges
- When offering price reductions it is no longer acceptable to ensure the previous price was established for a period of 28 days. Instead, sellers need to assess whether or not the promotion/price reduction offer is genuine. Practically this is likely to mean that the period in which the higher original price was applied is longer than the reduced price period and that products were widely available at the higher original price
- Be careful when referring to previous higher prices if the previous higher price was combined with other offers such as multi-buys or buy one get one free
- Introductory prices remain acceptable but you have to follow through with the price increase after the introductory period. The introductory price may only be offered for a short period
- RRPs are an increasingly dangerous area. Irrespective of whether or not a RRP is published by a manufacturer of the product you can only refer to it if that product is genuinely sold at the RRP price in the market
- You cannot compare the price of your product against the price of a product with a ‘designation of origin’, for example a Cornish pasty, Champagne, Melton Mowbray pies, unless both have the same designation of origin
- If there are material differences in the products that you are comparing, make sure you clarify what those differences are in clear terms
- It is a breach of the regulations to deprive consumers of sufficient opportunity or time to make informed choices by falsely stating the product is only available on the terms offered for a limited time
- If you advertise that an offer ends on a particular date you should do your best to avoid changing the end date unless circumstances arise which were not foreseeable. You should not use volume offers (multi-buys, combination offers, linked offers, or extra for the same price) unless the consumer is genuinely getting better value because of the offer
- Do not use the term ‘free’ unless the item is genuinely additional to what is being sold and there are no further charges or conditions attached to the ‘free’ offer. It is acceptable to specify the basis on which the free item is obtained such as a ‘free pen when ordering online’
- Compulsory charges, such as postage and packaging, booking fees etc should be included in the upfront price if they are compulsory. If those additional charges vary then it should be made clear the basis on which they do vary
Overall, the guidance has not significantly changed but the key points to bear in mind are as follows:
- There is a more broad-based requirement on retailers to act honestly when dealing advertising prices to consumers
- Price establishment cannot be as formulated as it previously was
- Promotions are more carefully guarded against and must genuinely represent better value in real terms to the consumer when compared to other products on sale by the retailer
- Sellers should be wary of referring to RRPs
- Compulsory additional charges must be included in the upfront price
- Any credit card/debit card charge must reflect the actual cost to the business
- Records need to be kept
Retailers must be aware of the regulations, because those found guilty of an offence can be subject to an unlimited fine, as well as potentially severe reputational damage to the brand.
An officer or manager of a company who consents to – or acts negligently in relation to – the offence can also be found personally liable, fined and face up to two years in prison.
It is therefore wise to seek advice on any areas of uncertainty to ensure ongoing compliance with regulations.
If you need legal advice on food and drink retail matters, please contact Mark (0113 227 0297 or firstname.lastname@example.org). For more information about us please visit www.gordonsllp.com/sectors/retail-lawyers/.