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Businesses get warning on price offers

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Retailers and manufacturers have been warned by the Office of Fair Trading (OFT) not to mislead customers through the use of pricing gimmicks.

The gimmicks include such offers as reference pricing (‘was £100, is now £60’), time-limited offers (‘ends today’), ‘baiting’ sales (the advertising of sale products with only very limited stock in order to tempt customers through the door), and ‘drip’ pricing (where compulsory costs, delivery charges for example, are added during the purchasing process).

Many offers, said the OFT, run the risk of breaching the law by failing to make clear the actual price of a purchase.

Although the OFT conceded that such practices were not unlawful, they could be construed as being against the interest of customers.

The warning follows the publication of an OFT market study into the advertising of prices, which established that certain pricing techniques used online, in-store and in adverts can mislead consumers.

The information came from consumer surveys, focus groups, psychology literature and groundbreaking behavioural economics research, suggesting that certain pricing techniques can lead consumers into decisions they would not have made were prices more clearly advertised.

The OFT said that the research had helped in determining how the watchdog intends to apply the Consumer Protection from Unfair Trading Regulations 2008, which prohibit, amongst other things, misleading advertising.

Recognising that most businesses want to play fair with their customers and to comply with the law, to help them do so the OFT has published a new framework which sets out the criteria it will use in enforcing action against traders engaged in pricing practices that cause the most harm to consumers.

John Fingleton, chief executive of the OFT, said: “Pricing practices, used in a transparent and fair manner, can provide consumers with a helpful shortcut to assess whether a particular offer is a good or bad deal. However, our research has highlighted how certain pricing tactics can be used in a misleading way.

“Misleading pricing is not only bad for the consumer, it is also bad for competition and creates an uneven playing field between fair-dealing businesses that stick to the spirit of the law and those that push the boundaries too far. We urge all firms to review their pricing practices and to get their houses in order where necessary.”

But Tom Ironside, the British Retail Consortium’s director of business and regulation, countered that customers make sophisticated judgments about prices and value within stores, between stores and over time, and have all the information they need to do that.

Mr Ironside added that BRC members abide by the rules: “They want satisfied customers who come back again and again. They would have nothing to gain from attempts to mislead and any extra legislation or over-enforcement on this issue would therefore be pointless. Enforcement activity should be directed at those who deliberately set out to mislead.”

Prashant Vaze, of the Consumer Focus watchdog, said: “Consumers should know upfront what the goods and services they buy will cost. Nothing frustrates consumers more than seeing the price bumped up by extras such as booking fees and handling charges added at the end of the transaction.”