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Advertising bodies loosen rules on price comparisons and on displaying VAT-exclusive prices


Businesses will be given more freedom to compare the price of their products to those of rivals under changes made to the UK's advertising rules.

The bodies that write the rules governing UK advertising, the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP), have scrapped rules that previously meant that advertisers could only offer price comparisons between their products and those offered by rivals if the products were "identical or substantially equivalent".

Under the revised CAP Code advertisers that elect to compare their product to a rival's on price will be required to ensure that the comparison is not misleading. The comparison must be objective and the "basis" of the price comparison must be made "clear" and in accordance with CAP guidance on lowest price claims and price promises. (5-page / 36KB PDF) Similar terminology has been adopted under the BCAP Code.

"CAP and BCAP consider that the change to the rules will allow for a broader range of comparative claims to be made, to the benefit of both consumers and advertisers, whilst retaining the robust protection in the Codes to prevent misleading advertising," a statement from the Committees said.

The bodies also announced changes to CAP and BCAP rules on VAT exclusive pricing claims.

Previous rules set out that advertisers could only display the price of goods they were selling without including the VAT charge in that figure if advertisers could be sure that everyone who the ad was addressed at could recover the cost of the tax. However, the Committees said that the rule may have discouraged companies from making "business to business claims" because they could not be sure "that their advertisements would be seen only by those who did not pay VAT or could recover VAT".

Under the new rule, which is set out in the same terms in the CAP and BCAP Code, organisations that display prices are generally required to include within those figures all "non-optional taxes, duties, fees and charges that apply to all or most buyers". Advertisers can display VAT-exclusive prices "if all those to whom the price claim is clearly addressed pay no VAT or can recover VAT" and provided that the information is "accompanied by a prominent statement of the amount or rate of VAT payable".

"For example, an advertiser could state “business price £X, excl VAT at 20%”, or present two prices, one for business customers and one for the public," the Committees said. "It remains the case that when using VAT-exclusive prices, advertisers must prominently state the amount or rate of VAT payable."

The changes to the rules come into force immediately.

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