The coming weeks are important shopping periods, retailers need to take care not to use misleading pricing techniques to shift units.

The coming weeks are important shopping periods, retailers need to take care not to use misleading pricing techniques to shift units.

With the days lengthening and the sun starting to shine, our thoughts inevitably turn to the (hopefully) warm and lazy summer which lies ahead of us. And as the first long bank holiday weekend of the year approaches, it offers the ideal opportunity to spruce up the furniture, replace those tired carpets and generally brighten up our homes.

“Our strong advice is for all companies to review their reference pricing practices and ensure that they fully comply with consumer protection law.”

Gaucho Rasmussen, Director Competition & Markets Authority

For retailers therefore, the coming weeks represent one of the most important shopping periods of the year, and many retailers try to attract customers by offering savings and discounts and by adopting different pricing strategies.

There’s nothing wrong with that of course. Everyone likes a bargain. But retailers need to take real care not to use misleading and potentially unlawful pricing techniques in order to drive interest and shift units.

Last month, as part of a significant body of work by the Office of Fair Trading (before it was succeeded by the Competition and Markets Authority on April 1), in which it looked into different pricing practices, a number of leading furniture and carpets retailers gave commitments that they would use genuine reference prices. Reference prices are used by retailers to advertise bargains and discounts to consumers, by comparing a lower current price against a higher past or future price (such as ‘Sale, Was £800, Now Half Price £400’).

There is no doubt that reference pricing can be a powerful marketing tool. However, consumers need to be able to trust that such price comparisons are fair and meaningful, and that the advertised savings are real, and represent a genuine discount. If not, then they may buy something they may not have otherwise chosen, were it not for the advertised (and misleading) saving.

It’s not only consumers who are disadvantaged. Companies who aim to be honest with their customers and observe the law often feel frustrated and disadvantaged when they see their competitors pushing the boundaries too far.

The OFT took action in the furniture and carpets sector but the CMA would be equally concerned if companies in this or other sectors adopted strategies such as:

  • Systematically discounting for longer periods than the non-discounted periods –  so there is nothing special about the saving/discount/sale being promoted to consumers
  • Selling relatively few items at the higher prices when compared to sales at the lower prices – thus the reference price does not in fact reflect the price the item is usually sold for
  • Only selling the higher price items in a small percentage of stores
  • Offering money off vouchers or bundling deals and giving staff the authority to automatically offer discounts – so that the product is rarely sold at the higher reference price

Of course, whether any practice is unlawful will depend on the specific circumstances, so our strong advice is for all companies to review their reference pricing practices and ensure that they fully comply with consumer protection law. It may be helpful to contact your local Trading Standards Services, who can provide you with advice.

The CMA will be carefully monitoring price promotions and it, or its enforcement partners, for example Trading Standards Services, will consider taking enforcement action where appropriate. The Trading Standards Institute is currently consulting on whether a review of the existing Pricing Practices Guide is necessary.

Put simply, all retailers, no matter how large or small, should take the utmost care to ensure that they treat their consumers fairly and adopt honest and clear pricing policies and practices.

Gaucho Rasmussen, Director Competition & Markets Authority