The Office of Fair Trading (OFT) has published a discussion paper on how the 2008 Consumer Protection from Unfair Trading Regulations (CPRs) might apply to common retail pricing practices.

The discussion paper, together with two research reports, have been published as part of the OFT's market study into the advertising of prices launched in October 2009. The OFT's study focuses on six pricing practices:

  • Drip pricing (where optional or compulsory price increments are added during the buying process)
  • Bait pricing (when discounted prices are used to attract consumers, but few units are available at the offer price)
  • Advertising using the term 'free' (for example, 'buy one, get one free')
  • Reference pricing ('was £60, now £30', basket of goods comparisons)
  • Complex pricing, in particular multi-part pricing (for example mobile phone packages), bundle or tied pricing (for example media packages) or volume discounts ('three for two')
  • Time limited offers

The OFT is also looking at some aspects of price comparison sites and the risk of inaccurate or misleading information.

The study identifies issues in relation to each of these practices and discusses where any of the comparisons might amount to a misleading action or omission under the CPRs, or where they might fall within one of the "always unfair" practices.

The purpose of the study is to reach a concluded view on how the CPRs should be interpreted with respect to these practices. For example, under the CPRs, the effect of a commercial practice is to be assessed from the point of view of the average consumer, who is reasonably well informed, observant and circumspect (or, when the practice is targeted at a particular group of consumers, from the point of view of the average member of that group). The study aims to use existing and new research to arrive at a considered view of what the "average consumer" should be taken to mean. The study also attempts to understand how consumers interpret adverts, and whether, in light of that interpretation, the commercial practices are beneficial or detrimental to them

In respect of the specific pricing practices set out above, the discussion paper sets out the nature of the analysis that will be carried out. Specific questions to be considered include, for example, consumers' expectations when presented with these offers, the extent to which the commercial practice deters consumers from shopping around, and the extent to which consumers' transactional decisions are affected by the commercial practice, an effect on the consumer's transactional decision being a necessary element of most breaches of the CPRs.

Although the discussion paper does not reach any firm conclusions, it provides a useful guidance insight into circumstances in which some of these practices may breach the CPRs, and how such breaches can be avoided.

The approach under the CPRs is, of course, in addition to any competition issues which might arise in the establishment of price promotions, for example in planning between manufacturers and retailers.

The report has been published in draft form and the OFT is inviting comments on its content and implications. These will be reflected in the final report due to be published when the study concludes which is expected to be in Autumn 2010.

The OFT's press release can be found here . Further information on the report and the OFT's ongoing pricing market study can be found here .

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 04/06/2010.