In October 2009 the Office of Fair Trading (OFT) announced it was launching a market study into various pricing practices which may potentially mislead consumers, with particular attention focused on how such pricing practices are used online. As a result of the OFT's initial findings it has just published a set of draft proposals which it wishes to "stress test" before it publishes its final guidance in December 2010.

The final guidance is not intended to become a set of 'hard and fast' rules but it will be used by the OFT as a starting point for assessing whether a particular advertised price promotion breaches the Consumer Protection from Unfair Trading Regulations. With this in mind OFT wants industry stakeholders, consumer groups and others to look at the proposals carefully and consider whether the proposals are reasonable and/or workable for their particular industry as they acknowledge that every industry is different.

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In October 2009 the Office of Fair Trading (OFT) announced it was launching a market study into various pricing practices which may potentially mislead consumers with particular attention focused on how such pricing practices are used online. As a result of the OFT's initial findings, it has just published a set of draft proposals which it wishes to "stress test" before it publishes its final guidance in December 2010.

The final guidance will not represent a new set of rules but will be used by the OFT as a starting point for assessing whether a particular advertised price promotion breaches the Consumer Protection from Unfair Trading Regulations. It should also be highlighted that the OFT has indicated that traders departing from the finalised guidance should ensure they have a clear case for doing so.

With the above in mind, the draft proposals, published in the form of a PowerPoint presentation, are designed as a platform for discussion and are as much a set of questions as they are a guidance document.

The Draft Proposals

The proposals focus on the five core areas initially referenced by the OFT in their October 2009 press release, those being: drip pricing, baiting sales, reference pricing, time-limited offers and complex pricing, with proposals also on price comparison websites and in respect of free offers.

Of particular interest to many online retailers are some of the proposals relating to the use of drip pricing. The OFT suggests that:

i) all compulsory charges (including taxes) should be included in the headline offer price;

ii) where there are a range of alternatives for a compulsory element of the product or service (e.g. the delivery method) the cheapest option available to at least 50% of consumers should be included in the headline price with alternatives clearly listed and costed; and

iii) online retailers should not automatically opt-in or opt-out consumers and should present them with neutral boxes to ensure they actively make a choice.

In situations where a relatively high reference price is used in comparison to the sale price (reference pricing) proposals include:

i) ensuring traders state if they have sold a product at a lower price in the last 3 months prior to their offer starting; and

ii) requiring traders always use the most valid price reference, which is unlikely to be Recommended Retail Price in most cases.

Where traders use time limited offers the OFT has suggested that the start and end dates of all the price offers should be clearly stated and offers should not usually be extended unless for reasons beyond the traders control.

It is proposed that volume offers not only observe the guidance on reference pricing but should also be based on genuine 'was' prices and unit comparisons should be in line with the Price Marking Order 2004 and should not be based on pre-sale prices.

Where only some products are available at a discount price and consumers may end up purchasing a full priced product, known as baiting sales, it is put forward that traders should give an indication of the actual availability in units at the start of the offer. In addition, it is proposed that internet traders should make links to advertised deals available directly from their home page / landing page.

In situations where complex pricing is used which makes it difficult for consumers to assess an individual price, for example 'three-for-two' or 'non-inclusive' prices, it is proposed that traders should provide a 'total cost of deal' price based on the compulsory components of the offer.

Stakeholders wishing to comment on the proposals can find further information 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

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 09/09/2010.