The long awaited new pricing practices guidance has been published by the Chartered Trading Standards Institute.
The guidance is intended to provide all traders, ranging from online retailers to supermarkets, with advice in respect of pricing promotions including:
- Using reference prices (e.g. "Was £3, now £2")
- Time limited offers
- Comparisons with a competitor's price
- Volume offers including multi-buys, combination offers (e.g. meal deals) and added extras (40% extra free)
- Up to" and "from" promotions e.g. "Up to 50% off sale".
The guidance replaces the 2010 Pricing Practices Guide produced by then Department for Business, Innovation and Skills which is now withdrawn.
The key change is a shift from a prescriptive to a principles based approach. The result is that the following well established guidelines no longer feature in the guidance:
- The "28 day rule" in respect of establishing a reference price for "Was £20, now £10" type promotions
- The guideline that at least 10% of promotional items must be available at the advertised discount (e.g. "up to 40% off sale"), and
- The old 6 month criteria for "new" claims.
Instead, the guidance emphasises the importance of considering the circumstances of each particular case with reference to the general legal principles surrounding unfair trading practices such as misleading statements and omissions.
A principles based approach reflects the underlying law and provides greater flexibility to accommodate more modern retailing practices. However, the lack of objective guidelines is likely to create uncertainty for marketing and compliance teams in respect of what is and what is not acceptable.
Taking reference pricing is an example. When faced with a fairly typical "was/now" promotion, the guidance outlines a number of issues to be considered and provides brief examples of what is more or less likely to be compliant. Nonetheless, it will be left to the trader to consider issues such as:
- How do you present pricing information to consumers? Do you need to set out the dates the product was previously sold at the higher price?
- Has the product has been charged at the previous higher ("was") price for sufficient period of time?
- How recently has product been sold at the higher price? What happens if the product has been discounted for brief period such as the Black Friday sale – how does this affect price establishment?
- What happens if the product has previously only been sold online but you wish to discount in retail outlets?
- Is the previous higher selling price a realistic one? Have a significant number of product been sold at this price?
In our experience, businesses will be required to develop their own internal guidelines to provide practical advice and consistency to marketing teams in respect of these issues. It is not simply a matter of "common sense" as the guidance suggests, particularly for a larger retailers or those operating in the fast moving industry sector.
Sales promotions fall with the remit of the UK advertising watchdog, the Advertising Standards Authority (ASA), as well as other enforcement authorities such as local Trading Standards departments and the Competition and Markets Authority. We anticipate that the ASA will play an active role in determining how these principles will be applied in practice following the receipt of complaints. It will be particularly interesting to see if a number of informal objective thresholds, similar to the old "28 day" rule, begin to emerge.
If you have any questions or would like to find out more about this, please contact Gavin Matthews, Nicky Strong or Ashley Borthwick.