How Consumer Protection Regulations affect price information: OFT consults

The OFT, as the main enforcer of UK consumer law, is required by the Consumer Protection from Unfair Trading Regulations to consider whether an advert making a price offer has complied with the Regulations by reference to whether it would mislead the average consumer.

The OFT has published a set of 22 PowerPoint slides (285KB) that lay down the  draft proposals it wishes to "stress test with industry" before drawing final conclusions. The OFT is hosting a series of roundtable events on the proposals this month and next.

According to the OFT: "The proposals do not represent new rules but a suggested starting point for the OFT to use when assessing whether an advertised price promotion breaches the Consumer Protection from Unfair Trading Regulations (CPRs)."

"The proposals are also likely to be a useful reference for industry when considering compliance with the CPRs," it said.

Earlier this year, the OFT commissioned research into various common pricing methods. It found that drip-pricing, where additional charges are added to a basic price as the sales process progresses, and time-limited offers cause most harm to consumers.

It proposes that, for drip-pricing, "All compulsory charges (including taxes) must be in the headline offer price."

"Where there are a range of alternatives for a compulsory element of the product or service (e.g. the delivery method) the cheapest option available to at least 50% of consumers should be included in the headline price – with alternatives clearly listed and costed," it said.

It provides an example:

"For example, product X may come with a compulsory delivery charge.  For some customers the delivery charge is waived because they agree to take delivery on a week day during working hours but charges apply for delivery at other times. The principle outlined at (2) above suggests that if 50% of consumers took advantage of the free delivery it would be acceptable to exclude the delivery charges from the headline price. However, if only 25% of consumers took advantage of free delivery then the charges for delivery should be included in the headline price."

Consumers should not be automatically opted-in or opted-out, according to the draft guidance. Rather they should be presented with "neutral boxes to ensure they actively make a choice." The total price should also be clearly displayed prior to payment being accepted.

For time-limited offers, traders should clearly state the start and end dates of all price offers, according to the OFT.

When traders contrast a sale price with a 'reference pricing', the OFT recommends using a 'was' price or an 'External Reference Price (ERP)'. It is only when these are not available that a trader should use the Recommended Retail Price (RRP) as a comparator, it suggests. It also says that 'was' prices should be established relative to the length of the sale and they should be established in at least 50% of outlets that go on to use the offer price.

The OFT believes 'volume offers', such as three-for-the-price-of-two promotions, must be based on genuine 'was' prices and should follow existing guidance on reference pricing, in particular the establishment period.

Where special offers are volume limited, such that consumers may find themselves buying a full-price product – also known as baiting sales – it may not be sufficient to say "hurry while stocks last." The OFT suggests giving an indication of availability in units at the start of the offer if availability is very restricted.

"As a rough rule of thumb if traders have less than 50% of stock or anticipated demand (whichever is larger) at the offer price then they should draw attention to the volume available in their adverts," says the draft guidance.

The OFT also warns internet traders to make links to advertised deals available directly from their home page or landing page. It says: "to do otherwise may be considered a breach of the annexe practice outlawing traders from refusing to demonstrate or show goods."

"Reasonable effort must be made to remove adverts if the offer no longer available – this is especially true of internet offers," says the guidance. It adds: "Prices displayed as 'from' where only some of the stock is to be sold at the lower price must also display a 'to' price."

The draft guidance, which also addresses free offers, bundling and price comparison sites, is open for comment. Stakeholders wishing to comment or participate in the roundtable events are invited to contact the OFT. The final report is due for publication in December.