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Consumer New - Pricing Practices Guide

Published on 13 December 2016

The Chartered Trading Standards Institute (CTSI) has published new guidance which replaces the former version, being the Department for Business Innovation and Skills’ (BIS) Pricing Practices Guide 2010.

The background

The new Guide follows a Which? super-complaint to the CMA on 21 April 2015 regarding misleading pricing practices in the grocery retailer sector. It provides practical advice on implementing UK pricing regulations, with a particular focus on assisting traders to comply with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).

General points

The new guidance avoids prescriptive rules and instead focuses on general principles of fair dealing. The main guiding principle is that traders have a responsibility to ensure that their pricing practices do not mislead, deceive or take advantage of consumers. The guidelines apply to "transactional decisions", which includes any decision a customer makes about payment terms, delivery or the exercise of any of their contractual rights.

Regulators may refer to the guidance when making enforcement decisions but because it is not statutory, the courts are not bound by it. Regulators are likely to give retailers until April 2017 to comply.

Under the guidance, the following practices are likely to be regarded as unfair:
• use of statements such as "all" or "everything" unless the statement applies to all products described in the marketing communication
• traders claiming they are about to cease trading/move premises when they are not
• using a default option (eg pre-ticked boxes) to obtain a consumer's consent to an additional fee or charge
• claiming a discount for certain products when all products are not included in the offer.

Specific guidance on pricing practices
a. Reference prices (eg the "higher" price in "was/now" promotions)

Price comparisons should not be made with a reference price:
• if the reference price is not genuine (ie the product was not sold at the reference price)
• if the new price runs for a materially longer period than the reference price was offered
• where the reference price is a price that is/was charged in another store, or
• if the reference price is not the last price that the product was sold at.

b. RRPs
• RRPs need to be prominently displayed as an RRP (rather than as a previous price that a trader has charged)
• Other abbreviations should not be used unless the trader can be sure that consumers will have a clear understanding of their meaning
• RRPs must represent a genuine selling price (ie this needs to be able to be substantiated by suppliers/manufacturers)
• Traders should not use their own RRPs as a price reference.

c. Volume offers (eg 2 for £3)

• These should only be used if consumers are genuinely getting better value because of the offer
• Volume offers may be regarded as unfair if better value was being offered before the volume promotion or for the same product elsewhere in the business.

d. "Free"

• Products (this includes services eg delivery) cannot be described as "free" or similar if customers have to pay anything more than the unavoidable cost of responding to the offer, collecting the product or paying for delivery
• Costs of free items/services cannot be recovered by reducing quality or composition of products, or by inflating the price of the products/services that are being paid for.

e. "Up to"/"From"

• Where a discount is stated as "up to" or "from" X, then X must represent a "significant proportion" of products that are included in the promotion
• The "up to" and "from" wording must be shown clearly and prominently.

f. Additional charges

• Where a compulsory charge (eg delivery) varies, consumers should be alerted to this at the outset in a clear manner
• Optional charges do not need to be included within the up-front price (but they need to be genuinely optional charges).

g. Online offers

• Any online offers should include, prominently and close to the price/headline claim, additional text that is likely to make a difference to a customer's decision.

Why is it important?

Whilst the guidance does not have statutory force, the introduction section of the guidance makes it clear that regulators may refer to it when making enforcement decisions regarding a trader' pricing practices. As such, it is a useful tool for businesses to demonstrate compliance with pricing regulations and in particular the CPRs. Regulators are expected to demand compliance by April 2017.

Any practical tips?

If ever there were an excuse to revamp your business's approach to its pricing practices, this is it. The guidance is clear and well-written, with practical implementation in mind. It includes examples of what constitutes good and bad compliance, meaning that the document is accessible by all within the business, not just the legal team. The clarity means that there will be little excuse for noncompliance moving forwards, and we suspect that the new Guidance will prompt activity from both Trading Standards and the CMA as we proceed through 2017.