Retailers beware pricing pitfalls

Retailers beware pricing pitfalls


Author: Philip Ryan

Faced with difficult economic times, retailers continue to look for innovative ways to attract customer loyalty - one of them is through price promotions.

These campaigns have been taken to new levels with the arrival of the supermarket price wars. Supermarkets have been leading from the front when it comes to offering a 'great deal', but it seems that not all of them have been adhering strictly to the rules and guidance.

A recent BBC Watchdog investigation into the Asda Rollback promotion revealed that prices for 43% of the 120 products looked at during the investigation failed to comply with one or more of the Government's pricing practices guidelines.

Examples of those failures include:

  • cat food at £4 from a previous price of £4.94, when in fact there had been four other prices used for that product in the interim period
  • hair dye listed at £7 for less than 28 days before being priced at a sale price of £5
  • pet food listed at the Asda Rollback price had been on sale at that price for twice as long as the original price

If the findings are true, these practices not only go against Government guidance, but would also likely be in breach of consumer protection legislation.

The Department for Business Innovation & Skills maintains a set of pricing guidelines to assist retailers in complying with consumer protection legislation, specifically the Consumer Protection from Unfair Trading Regulations 2008 which:

  • prohibits retailers from misleading consumers about the price of a product, or the manner in which it is calculated
  • prohibits retailers from misleading consumers as to the existence of a specific price advantage

When a retailer wishes to run a promotion that will include comparisons with its previous prices to entice customers, these are some of the practices that should be followed:

  • when a comparison is made with a previous price, the retailer should generally use the immediate previous price
  • any price used for a comparison should have been the most recent price available for 28 consecutive days
  • The period of time for which the new lower price has been available should not be for so long that it is potentially misleading to the consumer, and in any case it should not be longer than for the original higher price
  • comparisons should not be made with prices that were last offered more than six months ago

Wherever retailers deviate from the BIS Pricing Practices Guidance, there should be genuine good reason for this and exceptions should be made clear in any advertising and marketing material, where possible.

There are many more rules retailers should follow to avoid misleading consumers with their promotional campaigns. Not only can these sort of practices invite further investigation, they could lead to a company breaking the law.

For further advice and assistance on what retailers must do to fully comply with consumer protection legislation or for enquiries about compliance training for your sales and marketing teams please contact a member of the Regulatory team.