Price wars: How not to become a casualty
Competition in retail is at an all-time high, with even the big names on the high street struggling under the endless weight of overhead-free online retail. Combine that with a consumer base that has a more discerning eye for a bargain and an ever-tightening belt, with continuing worries of economic uncertainty – and it’s no surprise that price wars are becoming fierce. Whilst offering an enticing discount is a sure-fire way to attract customers, if it’s offered in a misleading or untruthful way it could end up costing a business far more than they bargained for.
What do I need to know?
Very simply, retailers have a responsibility not to mislead their consumers, but what does this look like in practice?
The Chartered Trading Standards Institute’s Guidance for Traders on Pricing Practice was produced in December 2016 and replaces the previous Department for Business Innovation and Skills Pricing Practice Guide. At first glance the content seems the same, and there certainly are similarities. A key difference, however, is that the onus is now on retailers to prove that their pricing system is not misleading. Responsibility is put back to the retailer to consider the consumer in their advertising, rather than just complying with a fixed set of rules. It is up to the retailer to prove they have considered the guides recommendations and that they applied due diligence to promotions. Businesses will need to provide evidence that they have done this.
What can businesses do to be sure they comply?
The CTSI Guide breaks this down very nicely, making it easy for retailers to check that any promotional prices are likely to comply with the guidelines.
It suggests that retailers ask the following
- Is any information (however it is given) false?
- Even if information is factually correct, will it, or the way it is presented, deceive or be likely to deceive?
- Is information that a consumer needs to know omitted, hidden or given in such a manner that is unclear, unintelligible or untimely? (CTSI Guidance for Trading Practice April 2018)
By asking these questions, retailers will be able to scrutinise their policies and ensure that the consumer is not misled.
This goes beyond the fabled 28-day rule, moving to discourage practices such as pricing seasonal goods out of season, then reducing to allow a discount to be shown at times of peak demand, or using a reference price where only a minimal amount of goods have been sold at that price. The guidance frowns on false price comparisons, such as using the highest retail price as a reference point, where there have been lower prices in-between, or using different reference prices across the brand, but choosing the highest price as a reference for a company-wide promotion.
The guide also highlights the importance of keeping promotions current, for example advertising a product as cheaper than a competitor but not monitoring the difference to ensure validity, would be viewed unfavourably. It is essential that businesses can demonstrate they have safeguards to protect against changes in promotional details, such as regular monitoring and updating.
Misleading by omission is also highlighted, for example if a restaurant offers two meals for £20 but only on a Wednesday, this must be clear on any promotional material.
Using the resources available, such as the Guidance for Trading Practice will help marketing and legal teams to stay within the guidelines, and to avoid any disputes. If a promotion is flagged to the CTSI then it is vital that businesses can answer the questions detailed above, and provide evidence of safeguarding, otherwise the penalties are costly, both financially and in terms of reputation. In this competitive market no business can afford to lose the trust of its customer base.