On 1 December 2010 the OFT published a market study into price-based advertising, and urged businesses to comply with fair trading laws or otherwise to risk enforcement action.

The Advertising of Prices study follows the publication of the OFT's discussion paper on the subject in  May this year and ranked the following pricing practices in order according to their assessment of the potential to mislead consumers:

  • Drip/partitioned pricing
  • Time limited offers
  • Baiting sales and complex offers
  • Reference pricing
  • Volume offers

The OFT has explicitly recognised that advertising prices is "a key part of active price competition which benefits both consumers and the economy" and stressed that the above list represents its views about the potential for the pricing practices to mislead; however, the use of these practices will not automatically render an advert misleading. Accordingly, the OFT has published a new framework which sets out the criteria it will use to prioritise enforcement actions against traders. It has urged organisations to review their pricing practices and "to get their houses in order where necessary".

The OFT will consider a number of general factors when assessing whether to take enforcement action. As well as the practice having the potential to mislead, the OFT will consider whether the specific implementation of the practice is likely to cause harm to consumers (for example by omitting to give consumers key information) and relevant characteristics of the product and market. In assessing this, the OFT will consider such information as the ease with which customers can make comparisons and independently verify the quality of goods and the chance of customers making "shopping errors" in respect of price, retailer, quantity.

The OFT has also highlighted the importance of taking into account the average consumer's reasonable expectations and compliance with the BIS (formerly BERR) Pricing Practices Guide and relevant CAP Codes.

The study also examined Price Comparison Sites and the danger of such websites misleading consumers as to the identity of traders operating or advertising on the site or the price of characteristics of a trader's products.

Please  click here for more information in relation to specific pricing practices, which we have set out in the same order as the OFT's ranking above.

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 22/12/2010.