With bank holiday weekends coming thick and fast this month, we are seeing the usual raft of promotions and offers for customers. When offering these pricing deals, retailers need to make sure they don’t inadvertently breach Trading Standards laws. Here, we take a look at some of the dos and don'ts for retailers.

Retailers are prohibited from engaging in unfair commercial practices by the Consumer Protection from Unfair Trading Regulations 2008 ("the 2008 Regulations"). There are four main types of commercial practice that are deemed unfair by the 2008 Regulations:

  • Prohibited practices – for instance, competitions where the prizes described are not awarded.
  • Misleading actions and omissions - it is an offence for retailers to advertise goods that don't exist or to make misleading comparisons between products.
  • Aggressive practices which covers the use of harassment, coercion or undue influence. Examples include the use of doorstep salespersons who refuse to leave when asked or in-store staff seeking to exert pressure on a customer to make a purchase decision.
  • A general duty not to trade unfairly - unfair commercial practice arises where it falls below the good-faith standards of skill and care that a retailer would be expected to exercise towards customers, and it impacts a customer's ability to make an informed decision about whether to purchase a particular product.

So how can retailers offer customers pricing incentives whilst remaining on the right side of the law?

Using reference pricing

One common promotion practice regularly used by retailers is reference pricing. This is 'was' / 'now' pricing, whereby a retailer will aim to demonstrate that a product is good value by making reference to the fact that the product was previously available for a higher price. This technique creates a reference point for customers and allows them to consider the value of a product.

When utilising reference pricing, retailers should ensure that products are sold for the same advertised price both online and in-store. The higher price should be charged for a longer time than the reduced one so that a genuine reduction in price can be demonstrated. Retailers should also be wary of increasing a product's price for a short time before dropping it back down for a promotion. This type of behaviour is likely to be misleading as it appears to exaggerate the saving available.

The Advertising Standards Agency is particularly alive to the improper use of reference pricing. The ASA has conducted research into customer understanding of reference pricing, which shows that customers "have limited understanding of pricing practices in general, and reference pricing in particular, and have an expectation that reference prices are regulated and can therefore be trusted." Retailers therefore need to ensure they are adhering to appropriate use of reference pricing that is fair and doesn't appear to mislead customers.

Volume offers

The use of volume offers, such as 'buy one get one free' or '50% extra free packs', are a regular sight on supermarket shelves. This type of promotion should only be used where it can be shown that the customer is genuinely getting better value because of the offer.

Volume offers pose a risk to customers as they can be confusing and difficult to understand. If using volume offers, retailers should ensure that customers have accurate, easy to understand, and complete information about the products they are buying. Retailers should not use it as an opportunity to mislead customers by capitalising on the potential that they won't necessarily calculate the price of the offer. Guidance issued by the Chartered Trading Standards Institute states that product packs that claim to be 'bigger pack – better value' need to be "objectively accurate and justifiable" and should be clearly labelled.

The use of 'free'

Retailers may also use a bank holiday weekend as a chance to offer their customers free items as part of their promotions. However they should be careful when using the term 'free' to offer additional products to customers. It is a breach of the 2008 Regulations, to describe a product as 'free', 'without charge' or similar if the customer has to pay anything other than the costs of collecting or paying for the delivery of an item. If the customer incurs any sort of charge for the free product then it cannot be promoted as free.

A free item must be additional to and separate from the primary product that is on sale, and the stand-alone price of the main product must be the same with or without the free item being included. The cost of the free item also cannot be recovered by reducing the quality or composition of a product or by inflating the price of the product.

Take away messages for the retail sector

  1. Do consider if your pricing practice might be viewed as deceptive.
  2. When using reference pricing do make sure that the higher price is charged for longer than the lower price.
  3. Do make sure that volume prices are objectively accurate, justifiable and clearly labelled.
  4. Don't describe a product as 'free' if there will be a cost to the customer.
  5. Do stress test your pricing practices before advertising them to customers. You can do that either internally or by seeking professional support.

Contributor

Paul Marshall

Partner