Half price, and other marketing myths

22 January, 2014

Tesco was fined £300,000 last year after admitting that it misled customers over whether its strawberries were genuinely “half price” and a number of high street carpet and furniture retailers are currently under investigation by the Office of Fair Trading (OFT) for using artificially high prices to exaggerate sales and price cuts. So what are the rules on pricing and how can customers be sure they are really getting a good deal?
 

The basic position is that shops are entitled to decide the price their goods are sold for. Despite folk law tales of people buying TVs for £1.99 (when it should have been marked at £199), a customer cannot insist that a shop sells them a product at the marked price, whether or not the item is correctly priced. However, shops are required to ensure that the prices are not misleading and trading standards can take action against retailers for unfair practices such misleading pricing.

 

The Consumer Protection from Unfair Trading Regulations 2008 prohibits unfair commercial practices when dealing with consumers. The Regulations state that shops must not mislead customers by giving false information or by omitting important information which could affect the customer’s decision to make a purchase.  The Regulations also give examples of practices which are considered unfair. These include:

  • Falsely stating a product or a special offer or sale price will only be available for a limited time
  • Describing products as “free” or “a gift” if the customer has to pay something to receive the product other than delivery charges or other unavoidable costs
  • Bait advertising, which involves advertising products at a special offer or sale price without disclosing to the customer that demand for the products is likely to exceed the limited stock available

An investigation by the OFT into the carpet and furniture industry has found that many retailers in the sector were misleading customers into thinking they were getting a bargain by artificially inflating the original price either by referencing “was” prices which were never previously used or were only available for very limited periods or by referencing unrealistically high recommended retail prices set by the manufacturer.

 

OFT director Gaucho Rasmussen said “OFT research has found that reference pricing can mislead consumers into thinking the item they have bought is of higher value and quality, pressure them to buy there and then so they don’t ‘miss out’ on the deal and also impair their judgment, as buying an item immediately means they do not get the chance to search the market for the real best deals.”

 

In all cases investigated by the OFT no explanation was given to customers by the retailer as to how and when the higher “was” prices were established.

 

In addition to the Consumer Protection from Unfair Trading Regulations 2008, there is also legislation which provides that the price of goods must be given inclusive of VAT, must be clearly displayed and must make it clear whether there are any additional charges payable (such as delivery charges).

 

Also, the Consumer Rights (Payment Surcharges) Regulations 2012 prevent retailers (predominately online retailers) from charging customers excessive fees for using credit cards. Any fees charged must reflect the actual cost to the retailer of providing that particular payment method.

 

Customers that feel misled by a retailer, unhappy with a retailer’s pricing practices or excessive payment surcharges, can contact the local trading standards service and the OFT have the power to carry out an investigation and to fine retailers for unfair commercial practices. Complaints can also be referred to other regulatory bodies (such as the Advertising Standards Authority) to be dealt with under their codes of practice.

 

Currently, consumers in the UK affected by a breach of the unfair trading regulations do not have the right to bring a claim for compensation. However last year, the Government completed a consultation on Consumer Redress for Misleading and Aggressive Practices and has anounced its intention to implement new consumer protection legislation giving greater rights to consumers affected by misleading and aggressive practices.

 

 

Reviewed in 2015