Following the Trading Standards Institute (TSI) call for evidence and subsequent workshops on the review of the Department for Business Innovation & Skills Pricing Practices Guide (PPG), firm proposals on the revised guide remain outstanding, reflecting the divergence of opinion on what it should actually look like. Whilst the detail is still somewhat up in the air, we look at the potential implications for businesses and whether the changes will signal the end of the '28 day rule'.
Although it is only guidance, the PPG has long been used by businesses as a means of ensuring the compliant presentation of prices to customers. While clearly considered outdated in some areas and in need of an update to reflect advances in the way in which consumers make purchases in the age of the internet and e and m commerce, the PPG is engrained as the established means of informing both businesses and enforcement bodies when considering good pricing practices. Any significant changes as a result of the ongoing review by the TSI are therefore bound to cause some disruption to existing knowledge and understanding. Feedback to the review thus far appears largely at odds with the summary of the responses suggesting that the guide is both useful and flawed in equal measure.
One of the main provisions in the PPG concerns the use of the 28 day rule. This states that a period of 28 consecutive days within the previous 6 months would be deemed reasonable in terms of the least amount of time a product would need to be sold at a higher price before it could be reduced and genuinely claimed to be discounted.
The 28 day rule is incorrectly perceived as being a sure fire way to ensure compliance when making discount claims. However, to follow the rule does not guarantee compliance. Looking at the wider regulatory context, the rule exists only as a guide to support the more fundamental requirement within consumer protection legislation that price statements are not misleading and that reference prices are genuine. The wider context of the pricing practice and, particularly, how this is likely to impact consumers should always also be taken in to consideration.
So while a business might legitimately sell a product at its genuine price for 28 days before reducing the price and claiming a discount, the PPG also allows businesses to artificially increase the price of a product for 28 days prior to reducing it and for them to then claim what could be considered a disingenuous discount, but which would be in accordance with the rule.
This latter approach is more commonly known as "yo yo pricing" and is one of several pricing practices the recently disbanded Office of Fair Trading identified as being particularly problematic after it commissioned its pricing study in 2010. And that is one of the chief criticisms of the PPG - that it is seen by many as being prescriptive guidance to be interpreted literally when in fact a literal interpretation does not guarantee that an underlying practice is not misleading.
It seems clear from responses to the review that industry favours a move towards a principles based approach which is supplemented by examples of good and bad practice. Examples can then be tailored to meet the many varying pricing issues faced by different industries. A shift to a principles based approach would see the 28 day rule disappear to be replaced by a single and broad requirement that reference prices are genuine. Supporting pragmatic examples would then be used to provide context for businesses thus ensuring less scope for abuse and/or misinterpretation.
Initial projections suggest that TSI was aiming to complete the process by late summer 2015 however with the Consumer Rights Bill and other consumer legislation being prioritised and with the looming General Election, it may well be that a delay in the anticipated time-scales occurs.
In any event, it is our view that industry should expect a wholesale re-write and a move to a completely new principle-based guidance document. Whilst removing the '28 day rule' amongst others will undoubtedly cause some confusion as businesses who have long adhered to the PPG are forced to consider a new approach, a shift to a principles based approach would seem to be more relevant and provide greater transparency for consumers in today's fast-paced competitive marketplace.