January 2017: The Chartered Trading Standards Institute (CTSI) has published new guidance aimed at stopping misleading and confusing pricing tactics used by some retailers. The publication of the guidance follows a Which? investigation, several complaints from disgruntled shoppers and a subsequent super-complaint on misleading pricing practices in the grocery sector. Which? had claimed that retailers were misleading and confusing consumers into sales by creating a façade of savings that did not actually exist. The guidance provides an overview of consumer protection legislation relating to pricing and associated practices, for all traders. The guide put together by the CTSI can can be found here.
What is a sales promotion? A sales promotion is a marketing device designed to encourage the purchase of a product or service (for example, a competition or prize draw). There are laws and voluntary codes that regulate most sales promotions, so do take legal advice before running any type of sales promotion. Failure to comply could result in the business:
- Having to withdraw a campaign
- Being fined
- Being sued
- Suffering adverse publicity
- Facing possible criminal prosecution
This business briefing sets out what a business needs to know about the different types of sales promotions that can be used to promote its goods or services.
- If a prize competition requires payment to enter, then success must depend on the exercise of sufficient skill, judgement or knowledge
- The competition should not merely consist of guessing the outcome of a race, competition or other event, or guessing whether or not something will happen or is true (chance). The combination of payment, chance and prize would make the competition an illegal lottery
- A prize draw is a scheme in which prizes are allocated by chance but there is no entry charge
- In Great Britain (but not Northern Ireland), a business can require a product purchase as a condition of entry to the prize draw, but cannot inflate the price of the product to cover the cost of the promotion. Otherwise the draw will be considered an illegal lottery
- A business can also make it a condition of entry to the draw that the partcipant has to accept certain conditions (such as giving personal information)
If the draw is open to all, the chances of success must be the same for everyone regardless of how they entered and the prize allocation must be by chance
- Participants in an “instant win” draw should be able to get their prize immediately or know they have won and how to claim their prize without delay, cost or hassle
- A business should not offer a prize promotion without awarding the prizes described or a reasonable equivalent
- Do not create a false impression that a prize has been won if there is no prize or the customer has to incur a cost to claim the prize, as this is a criminal offence
Price and value promotions
- A price promotion could be money off or free extra volume
- The promotion must be (and a business must be able to prove that the promotion is) a genuine price reduction or increase in volume that is applied to a product for a particular period of time
- The business must say when the offer ends or that it is “subject to availability”. It must also make sure that demand for the offer is estimated as accurately as possible
- The promotion must always be clear and not misleading. The comparison with the regular price or amount must be clearly marked and should not be ambiguous. For example, is the consumer getting 10% more volume or the same volume for 10% less cost?
- The products must be of the same quality and size as normally priced products
- If the business is comparing the price of a product to its previous or usual price (including for volume promotions), then its previous price should have been the most recent price available for 28 consecutive days or more and comparisons cannot be made with prices that were last offered more than six months ago. The business can then reduce the sale price further, provided it mentions the interim price. Businesses must be able to provide proof of all prices used in comparison exercises
- A business cannot suggest the sale is for a shorter period of time than is intended. However, the business can extend the sale if it announces the extension clearly
- Businesses can use notices saying, for example, “up to 50% off” if the maximum discount quoted applies to at least 10% of the range of products on offer
Introductory offer price: The offer must be limited in time and the promoted product must be available after the promotion has ended at the same outlet but at a higher price. Claiming an offer is limited when it is not, is a criminal offence.
Free products (for example, “buy one get one free”) and coupons
“Free” products must be that – free. A business cannot increase the price of any product the consumer must also buy to get the “free” product or add on any other charges (beyond unavoidable cost, such as the true cost of freight) to contribute towards the cost of the “free” product.
If a business is issuing coupons to be redeemed against a particular product, it must ensure that retailers only accept the coupons against that product.
Never describe a gift (that is, something offered to all or most participants) as a prize.
The content of this Business Briefing is for information only and does not constitute legal advice. It states the law as at January 2017. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this briefing.