Paying the price for misleading pricing practices

Two developments have recently highlighted that supermarket pricing practices may not be all they should be.  Today, Richard Lloyd, executive director of Which? was interviewed on BBC Radio 4’s Today programme as a result of a report Which? had published on supermarket’s not-very-special offers.

Which? claimed that some supermarkets have misleading deals and highlighted two particular practices as being particularly frequent: discounting products that had only been sold at a higher price for a very short time; and multiple offers where it was actually cheaper, or cost the same, to buy the products as single items.

Supermarkets have said that the “offers” are down to human error , but Which? says that there have been thousands of such incidents and include Ocado, Sainsbury’s and Asda in its examples.

It said that it wants the supermarkets to put an end to misleading special offers, the government to make the rules for special offers simpler, clearer and stricter, and tougher enforcement action to clamp down on rule breaking supermarkets.

The other development is that Sainsburys is taking on Tesco, or rather the Advertising Standards Authority, in the courts.  Some time ago the ASA adjudicated on a complaint by Sainsburys about  a price match advertisement by Tesco.

Sainsbury’s challenged whether Tesco’s claim “you won’t lose out on big brands, own-label or fresh food” was misleading for own-label and fresh food as some of the products compared were not comparable.  Sainsburys also thought that that the basis of the price comparison had not been made clear.

Sainsburys’ point was that many of its products were fair trade or ethically sourced and Tescos were comparing products which did not have that ethical provenance. Their view was that differences in provenance of ingredients and certification were of such significance, that the products could not be considered as meeting the same need or intended purpose as is required by the CAP Code and legislation on comparative advertising.

The ASA did not uphold the complaint.  In a long adjudication report, it said that the claim had been substantiated and was not misleading.  The ASA also said that the basis of the comparison was clear and did not breach the CAP Code.  Sainsburys has indicated that it intends to bring judicial review proceedings and its CEO was interviewed on BBC Radio 4’s Today programme last week, saying that he thought customers would think the decision was strange.

So what does the CAP Code say about price comparisons?  There are general provisions relating to advertising not being misleading and not omitting relevant information.  Specifically rule 3 states:

3.33 Marketing communications that include a comparison with an identifiable competitor must not mislead, or be likely to mislead, the consumer about either the advertised product or the competing product.

3.34 They must compare products meeting the same need or intended for the same purpose.

3.3 They must objectively compare one or more material, relevant, verifiable and representative feature of those products, which may include price.

These rules mirror the rules in the consolidated Comparative Advertising Directive which defines comparative advertising as any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor. It is permitted as long as it complies with the requirements set out in Article 4 of the CAD.

If Sainsburys is successful in its action, it could have an important effect on what is permitted in comparative advertising.  Advertisers may make a greater investment in demonstrating that their own products are distinctive to competitors’ similar products.

That said, even without a successful challenge, the very fact that Sainsbury’s has raised the issue may make consumers consider whether a “value” or “basic” item is really cheaper than a Fairtrade, “Taste the Difference” or “Finest” version, when all factors are taken into account.

However, if Which? is correct, the supermarkets may wish to consider all their pricing practices before calling out competitors – glasshouses and stones and all that.  When the Consumer Protection from Unfair Trading Regulations were introduced in 2008, the Pricing Practices Guide was introduced at the same time with an updated edition published in 2010, but it is clearly not having the desired effect.  Retailers may want to have a good hard look at the way they price their products before the regulators start to take too much of an interest.

Area of Interest