House of Frasers misleading discounted prices In this feature l misleading pricing strategies l consumer protection l guidelines Too good to be true Pricing strategies that mislead consumers are being employed by some of our most trusted brands, warns matthew Bartlett T o survive in a competitive market, the modern retailer must employ various pricing strategies to make consumers buy goods from their shops, rather than from their competitors. Many techniques are used to make consumers feel they are getting a bargain or, at least, a good deal. But you can have too much of a good thing, and its an issue trading standards officers need to watch, even with some of our most recognised and trusted brands. In November 2015, officers from the collaborative trading standards service of Blaenau Gwent and Torfaen County Borough Council saw that well-known retailer House of Fraser was discounting its Christmas items, such as crackers, decorations and gifts first by offering three for the price of two, and then by reducing items by 30 per cent. While the discounts seemed to give House of Fraser the edge over competitors that were just beginning to move into full Christmas mode and fill their shelves accordingly, it struck us as behaviour that could mislead customers. As a result, we started to monitor the selling (reference) prices of various Christmas items in store, making regular visits to the Cwmbranshop over seven weeks. We took photos of some of the itemsthat were discounted, and kept records that showed the was price, the now price, and the percentage discount it was claimed was being offered. We found that, over the festive period, the retailer continued to lower the discount on its Christmas products. Each time this was done, the saving presented to consumers on the swing tag attached to the goods was given by comparison to the original reference price established by the trader, when the goods were first displayed for sale. No mention was made of the intermediary prices. This gave shoppers the impression they were getting a better bargain than was the case. It may seem to some to be a rather trivial affair, but this is a large retailer in whom the public consider they can place their trust This business practice is one that a company of this standing should have been painstakingly guarding against District Judge Martin Brow virtual reality To see if this was a nationwide pricing practice, we decided to check what was being offered in other House of Fraser stores and online. We visited the retailers shops in Cardiff and Bournemouth, where we found the same items being offered at the same discount as in the Cwmbran store. The trader continued to make reference to the highest original selling price, without informing consumers that the goods had been on sale at lower intermediary discounted prices. Likewise, the retailer made Now X Was Y statements on its website again without reference to the intermediary prices. At the end of the Christmas selling period (30 September 2015 to 30January 2016), we established that House of Fraser had held what webelieved were seven separate and unique sales events over a four-month period. The goods were initially put out for sale at their original, highest reference prices for 28 days in a limited number of the retailers stores, at an offer of three for the price of two. This is important to note because the more outlets in which the higher (original) price was offered and the greater the exposure of this price to consumers the more likely the pricing practice is to be fair. Conversely, the fewer outlets in which goods are exposed for sale, the more likely the pricing practice is to be misleading. The price of the goods was then cut by 30 per cent and by 30percent again in a separate promotion. As part of the Black Friday sales event, the goods were reduced in price by 50 per cent, then by 50 per cent again. Finally, the price was reduced by 70 per cent before Christmas, and by 70 per cent again in January 2016. On each occasion, the retailer made price comparisons with the original STraWBErrY FaIr? reference price, without making the basisof that comparison explicitly In August 2013, the issue of misleading pricing knownto consumers. At the height strategies hit the headlines when supermarket of the 2015 Christmas sales period, giant, Tesco, pleaded guilty to charges brought by Birmingham Trading Standards under House of Fraser was offering its goods the Consumer Protection from Unfair Trading to consumers at what appeared to be Regulations 2008 (CPRs). a70per cent discount. The case centred on whether a half-price offer We contacted House of Frasers on punnets of strawberries was genuine or not. Primary Authority (PA), the City of Tesco had sold strawberries at the lower half price Westminster, to determine whether offer for longer than the goods were on sale at the any assured advice on this type of higher normal price. pricing practice had been given to the When passing sentence, Judge Michael business. We discovered that, just a Chambers stated that if a product is offered at few months before our case in April half price, it is implicit that the higher reference 2015 the PA had advised the store that price stated is the normal price for the product. The product should have been on offer at the any comparison with a previous price full amount for a much longer period, so as to should, in general, be with the immediate fairly and properly characterise it as the normal previous price for the product. If the price, and so the product would be a genuine comparison is with an earlier price, then advantageous bargain at half that price. the basis of the price comparison should be explicitly made known to potential purchasers. This was in line with the thenDepartment for Business, Innovation and Skills Pricing Practices Guide and the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). This assured advice was given by the PA after a referral in early 2015 from another local authority trading standards service, which had identified similar misleading reference-pricing issues. A handbag had been placed in a 50 per cent off sale and marked with was and now prices without informing the consumer that the item had been onsale at a lower price in between. Held to account We decided to proceed with a prosecution because it appeared to us that the business had failed to follow the Primary Authority advice it had been given. We were concerned the company was deliberately adopting misleading practices to make consumers think they were getting more of a bargain. We alleged that, by breaking up the selling period into seven different sales events, the retailer had deliberately tried to make it look as if the goods had been on sale at the highest original reference price for longer than they were on sale at the lower intervening prices. In so doing, it was also alleged that the retailer was likely to mislead consumers as to the true discount being offered, in breach of Regulation 9 of the CPRs. On 29 November 2016, at Newport Magistrates Court, House of Fraser pleaded guilty to eight misleading actions under the CPRs, relating to offences in Torfaen, Cardiff, Bournemouth and online, was fined a total of 40,000 and ordered to pay 8,621 in costs andcharges. District Judge Brown, who heard the case, stated that consumer protection should be at the forefront of retailers principles. It is certainly what drives much of our work as trading standards officers, and retailers should be aware of the consequences of failing to adhere to government guidelines and consumer protection legislation. rEFErENCE prICINg In December 2016, CTSI published It indicates that declaring a reference It is unlikely that consumers will have Guidance for Traders on Pricing price in an offer can create a point that made a record of the reference prices Practices at the request of the Department customers use as a base for estimating the to determine for themselves whether for Business, Energy and Industrial Strategy value of a product, and might reduce the the claimed price reduction is genuine. and the Consumer Protection Partnership. effort consumers put into shopping around So it is up to vigilant enforcement officers and comparing prices. to ensure that bargains being presented While this guidance has no statutory standing, it will help when carrying out an assessment of traders pricing practices. Credits Matthew Bartlett is a senior trading standards officer at Torfaen County BoroughCouncil. Images: Lukasz Pajor / Shutterstock It follows that reference pricing calls for a high level of trust and integrity. To share this page, in the toolbar click on to consumers on a daily basis are genuine and not misleading. You might also like The price is right? February 2017