The OFT today (2 December 2010) urged businesses to review their pricing practices to ensure they comply with fair trading laws, or risk enforcement action.

This follows the publication of an OFT market study into the advertising of prices, which established that certain pricing techniques mislead consumers, potentially breaching the law.

OFT research suggests that certain pricing techniques can lead consumers into purchasing decisions they would not have made were prices more clearly advertised, or to spend more than they need.

According to the OFT, the greatest potential for harm comes from “drip pricing” (where price increments - such as taxes, card charges and delivery charges - are added during the buying process), “time-limited offers” (such as “ends today”) and “baiting” sales (where the trader has only a small proportion of stock available at the offer price).

This does not mean that the use of these practices is automatically unlawful - this will depend on the specifics of the advert and a number of other factors.

The relevant law is in the Consumer Protection from Unfair Trading Regulations 2008. Breaches can result in court action and fines. The CPRs replaced a raft of previous legislation (which included quite detailed provisions on price marking and advertising) with a series of “principles-based” provisions which now need to be applied. The Consumer Protection from Unfair Trading Regulations 2008 prohibit traders from engaging in unfair commercial practices, including those which are likely to distort the behaviour of the average consumer.

The OFT is particularly concerned with the following “price frames”:

  • drip pricing, time-limited offers and bait pricing (as above)
  • complex pricing (for example offers where the price depends on numerous elements which may be conditional on each other)
  • reference pricing (such as “was £100, now £60”)
  • multiple unit price promotions (such as “three for two”)
  • “free” products offered as part of a package (such as “first two months free”).

The OFT launched a study into the Advertising of Prices in October 2009 (press release 126/09).

The Department for Business, Innovation and Skills has published a 'Pricing Practices Guide' for businesses (pdf) which recommends a set of good practices in relation to pricing.

The Advertising Standards Authority (ASA) regulates the content of advertisements, sales promotions and direct marketing in the UK and applies the CAP and BCAP advertising standards codes. The OFT supports the ASA by acting as a statutory regulatory partner, with the ability to take enforcement action if necessary.

Businesses should review their practices to avoid an unwitting breach of the legislation.