Comment: The OFT needs to remove ambiguity in price promotion laws

No comments

Last week, six furniture stores and carpet retailers came under scrutiny from the Office of Fair Trading (OFT) for their pricing strategy.

Last week, six furniture stores and carpet retailers came under scrutiny from the Office of Fair Trading (OFT) for their pricing strategy. Ahead of the bank holiday weekend - one of the busiest trading periods for furniture and DIY retailers - the OFT announced that the stores in question had advertised price cuts which were not genuine.

The OFT claims that these retailers have been exaggerating price cuts and the comparison to ‘reference pricing’ in an attempt to attract consumers. This is, for example, where a retailer claims that a product which ‘originally cost’ £600 is now ‘reduced’ to £300.

However, the OFT criticised the retailers for never actually pricing at these original levels. On average, it found that 95% of sales were at the lower, or “now” price, suggesting that the original prices were not genuine.

There are two main reasons why the OFT sees this as unacceptable. First, it can put consumers under pressure to buy the item then and there instead of searching around for a better deal. Secondly, it can lead to consumers thinking they are getting a product that is of a better quality and higher value.

However, while this practice is certainly questionable, it is by no means illegal and is certainly not limited to just furniture and carpet retailers. Tesco, for example, recently came under fire for selling ‘half price’ strawberries and was fined £300,000 for misleading consumers.

Retailers may deserve some criticism here, but the real fault lies with consumer legislation. The current law on price promotions is ambiguous and the wording is open to different interpretations. So there is no clear right or wrong way at present and retailers are able to use the law to their advantage. However, if the OFT decides you are bending the rules too far, you can find yourself in hot water.

The reality is that, in the tough trading conditions that the sector is experiencing, it is inevitable that retailers will develop strategies that make the most of any ambiguity in the legislation.

With business rates on the high street showing no sign of abating and ecommerce growing, retailers are likely to look for as many ways as possible to attract customers into their stores. And can you blame them? By this nature, offering low, competitive prices makes good business sense.

UK consumer legislation, which governs a £311-billion industry, is too large and complex to amend quickly and would require a lengthy consultation with the whole sector and consumer groups.

In my view, it would be far more effective for the OFT to work towards strengthening the way the law on promotional pricing can be interpreted, in order to extinguish any discretionary use of wording. What’s more, the OFT could also provide guidelines for retailers to remove any ambiguity and ensure that consumer pricing strategies are fairer for all.