Office of Fair Trading warns over misleading ads

Retailers have been warned by consumer watchdog the Office of Fair Trading (OFT) that they must review their use of common pricing practices or face legal action.

The OFT said investigations it and other groups had carried out had clearly established that certain pricing techniques can mislead consumers.

They can induce people into making purchasing decisions they would not have made if the total price was made clear and this potentially breaches the law.

John Fingleton, OFT chief executive 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. "

The worst of the practices according to the OFT, and the ones that have the greatest potential to cause harm, are drip pricing, time-limited offers and baiting sales (having only a small proportion of stock).

Drip pricing is where the headline price looks like a bargain but extra costs are added; these are sometimes optional but often compulsory such as taxes, card charges and delivery charges.

The OFT said not all less-than-transparent practices are automatically unlawful as it will depend on the specifics of the advert and a number of other factors – some could be.

But it said this latest research has helped it determine how it proposes to apply the Consumer Protection from Unfair Trading Regulations (CPRs) 2008. This law prohibits unfair and aggressive advertising; among other things, misleading advertising.

Breaches of the regulations can result in court action and fines. The OFT said it recognises that most businesses want to play fair with their customers so has set out guidelines for companies.

The Department for Business, Innovation and Skills has also published a pricing guide for businesses.

“We urge all firms to review their pricing practices and to get their houses in order where necessary,” said Mr Fingleton.