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This week many businesses which trade through Amazon discovered, to their horror, that they were selling products for 1p as a result of an error in automated pricing software.
It has been reported that many of these businesses are nursing heavy losses and could even face closure in the new year.
How can businesses minimize their risks of this happening? Here’s Comet’s top five tips for the legal teams that advise online traders:
Avoid saying things on a website such as ‘the goods offered for sale on this site’. In fact, avoid the toxic term ‘offer’ at all if you can, not only in the terms and conditions but also elsewhere.
A retailer should ensure that any products on its site are invitations to treat, eg: ‘for sale: widgets at £10 each’, and not: ‘for sale: 100 widgets at £10 each. The first 100 replies with payment will secure a widget’.
In other words, the site should invite an offer from the customer.
Make sure that the terms and conditions are clear about the process.
Here’s an example of terms and conditions which spell out when the contract becomes legally binding and which give the retailer a bit of ‘wriggle room’ if its systems start randomly offering £500 products for 500 pence each:
The order acknowledgement does not mean that your order has been accepted by us. We may send you an email to say that we do not accept your order. This is typically for the following reasons: … there has been an error by us on the pricing or description of the goods. We will only accept your order when we send you an email that confirms this. At this point, a legally binding contract will be in place between you and us and at this point we will despatch the goods to you.
Take care though. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out the information that should be sent to customers before they are bound by the contract. This includes the main characteristics of the goods such as the price (and any delivery or other charges). Under this law, this information is treated as a term of the contract. Therefore, any revised price (ie the correct one) needs to be communicated to the customer in accordance with the Regulations.
Try to ensure that mistakes are not made in the first place (oh the joy of hindsight!). Social media and other sites can easily spread the ‘good news’ of a pricing glitch to potential customers quicker than you can say ‘what do you mean we’re selling 70 inch, 3D, HD, LED smart TVs for 10p each?’
Ask your client: Who is responsible for dealing with a problem at 3am? How quickly can the problem be recognised and fixed? What can be learnt from past mistakes? If the goods are sold through a third-party website, what does the contract say?
Retailers (and their advisors) should be aware that websites exist which actively report on pricing errors. For example, the Telegraph recently reported on Ashleigh Swan whose eponymous website Ashleigh Money Saver, with almost 190,000 fans on Facebook, draws pricing glitches to its readers’ attention, including via its text alert service. Users can even submit mistakes to the site and receive a £10 online gift card.
On its ‘glitches explained’ page, the site does reiterate that, ‘companies are NOT legally obliged to honour orders’, but retailers shouldn’t rest on their laurels. Check out the tips which the site gives:
If retail is a battle between retailers and customers, that’s quite some offensive!
The business should have a PR team ready.
If things go wrong, act quickly. It won’t cut the mustard to release an achingly dull and verbose explanation a few days later along the lines of, ‘bla bla bla … our lawyers tell us that … bla bla bla’.
Disgruntled customers can mean bad PR for a business. They may feel hard done by even if, legally, they aren’t in the right. Accordingly, in the past some retailers have offered disappointed customers a sum of money, gift vouchers or a voucher code (in a lesser amount) as a goodwill gesture. Others have simply accepted the orders and taken the hit.
So what do you think? Have you advised clients on glitches in the past? Do you have any tips? Do let us know below…
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