US Phenomenon Black Friday (and its online counterpart Cyber Monday) has now made itself firmly at home in the UK. And, with less than a month to go until the big event, more retailers than ever will be planning deals to entice shoppers following a challenging period for the sector.
But while consumers snap up what appear to be bargains, regulators are tasked with preventing retailers from misleading their customers with deals that aren't quite as appealing as the eye-catching "Special Offer" label suggests. The Advertising Standards Authority (ASA), one of the industry’s most prolific regulators, has already issued a reminder to retailers ahead of this year’s big event.
But it is important to remember that misleading retail pricing can also attract the attention of the more powerful statutory regulators such as Trading Standards and the Competition and Markets Authority (CMA). This is a fact brought home by H Samuel’s prosecution brought by local Trading Standards earlier this year as well as the recent Which? research on misleading supermarket special offers. So, how can retailers ensure they stay on the right side of the regulators in the pre-Christmas discount season?
H Samuel and the case of misleading diamond deals
Earlier this year, the jeweller H Samuel was fined £60,000 plus costs after pleading guilty to 17 breaches of the Consumer Protection from Unfair Trading Regulations. Newport Magistrates’ Court held that the promotion of some of H Samuel's “Forever Diamond” range (on offer between November 2017 and June 2018 via its website) was misleading. The diamond rings were listed with the description “Was £2,599, Now £1,169”, suggesting customers were getting a great deal.
However, H Samuel failed to show that the rings had already been on sale at a knocked-down price of £1,299 (from the original £2,599) before being discounted further to £1,160. Under consumer law, retailers are expected to display intervening prices (i.e. as an additional crossed out price) so that customers get a clearer picture of the overall value of the discount. The Court found that H Samuel also made price comparisons on its website that didn’t accurately represent how long an item had been on sale at the higher price.
The fine handed out to the jewellery retailer was at the lower end of the spectrum, as the Court accepted that the breaches were due to a system failing rather than a deliberate intention to mislead customers. H Samuel was also given credit for its guilty plea, good character and cooperation with the investigation.
Have retailers fallen foul of regulators before?
H Samuel’s case was the first notable local authority prosecution of a retailer in relation to a misleading price promotion since Tesco was fined £300,000 in 2013 by Birmingham Trading Standards. In that case, the supermarket was found to have sold some strawberries at full price (£3.99) for just one week before selling them at the discounted "half price" (£1.99) for most of the summer.
In H Samuel’s situation, it’s worth noting that the discounts in question were offered online, yet Torfaen Trading Standards was still prepared to take on the prosecution despite the lack of a local link between the offence and the Welsh County of Torfaen. This shows that online retailers who display misleading website pricing could potentially be at risk of criminal enforcement from any of the hundreds of local authorities across the UK. The case also demonstrates that the breach does not need to be deliberate; retailers can still be guilty of an offence if they have failed to put in place procedural safeguards to prevent exaggerated or misleading deals being presented to customers.
Which?’s ‘special offers’ research
Misleading pricing also remains an area of focus for consumer association Which?. Following on from its “super-complaint” to the CMA in April 2015, Which? has released the results of its research into a year's worth of supermarket discount pricing. The research looked at the price of 450 products at seven online supermarkets and found that there were still issues with misleading discounts with all but one retailer.
For example, the research highlighted “yo-yo” pricing by Morrison's on Cathedral City cheese, which was advertised with the tag "Was £3.50, Now £2". Though customers appeared to be getting a great deal, the product had been on sale at the ‘discounted’ price of £2 the month before. Which? also pointed to examples in which products were on sale at the discounted price for longer than the original crossed-out price. It reported that Asda had advertised ice-cream for 12 weeks as "Was £3.50, Now £2" despite being on sale at £2 for more of the year than at the full price of £3.50.
Which? has reported the outcome of its research to the CMA, who may now consider further follow-up action.
Should the CMA have tougher enforcement powers?
To help combat this, it has been widely anticipated that the CMA will soon be granted additional enforcement powers to tackle breaches of consumer law, including misleading pricing. Under the current rules, the CMA typically address consumer law offences with businesses by obtaining commitments to better practice from retailers, only going to court in exceptional circumstances to enforce non-compliance.
However, under proposals tabled by Theresa May's government – which are due to be consulted on in a Consumer White Paper – the CMA may be granted the power to fine non-compliant businesses directly (i.e. without going to court) if it determines that there’s been a breach of consumer law. This mirrors the powers it already has in relation to competition law enforcement, where multi-million pound fines are handed out to large businesses frequently.
It’s thought that the powers could be used for offences such as misleading advertising and pricing promotions, alongside high-priority issues for the CMA such as unfair auto-renewal terms and the so-called “loyalty penalty”.
The Consumer White Paper is currently on hold due to current state of flux in Westminster, but retailers will want to watch this space closely for developments – particularly with a general election coming.
Our advice for approaching price promotions
In order to stay on the right side of the law when offering Black Friday bargains, we suggest that retailers:
- Put in place internal operational procedures to pre-vet price promotions before they go live. Breaches, such as in the case of H Samuel, are often the result of human error or oversight, which can be prevented via procedural safeguards. Make sure the person or team responsible for approving your promotional deals are familiar with the CTSI Guidance for Traders on Pricing Practices.
- Be mindful of yo-yo pricing in the build up to Black Friday. Regulators are likely to take a dim view of retailers who artificially raise the price of products in the lead-up to Black Friday before slashing prices on the big day. For example, if a laptop has been on sale for 6 months at £795, but rises to £950 for two weeks just before returning to its ‘Black Friday’ price of £795, regulators are likely to find that the offer is misleading.
- As a general rule of thumb, a product should not be on sale at the discounted price for longer than the original reference price. The relevant legislation is principle-based so there are no hard and fast rules, but the reference price used as the basis for comparison (i.e. the "was" price) must be the “genuine” original retail price.
- Forward planning is key for promotional deals. If products are placed on special offer at the last minute, there may not be time to check that the reference price and/or any intervening prices are genuine. Lack of planning can also result in a product being left on offer for too long, which may land you in hot water too.