ASA Adjudication on Reader Offers Ltd

Ad

Two national press ads for cruises with Reader Offers:

a. The first ad stated "THE ST. PETERSBURG JOURNEY OF DISCOVERY A TRULY AMAZING, 14 NIGHT NO FLY CRUISE ... ". A box of text was headlined "AMAZING READER OFFERS LTD PRICES". Within it, a column labelled "FULL BROCHURE PRICE (PP)" listed room prices at "£3,039, £3,649, £4,309, £5,429, £6,479, £7,954, £5,039, £6,899". An adjacent column was headed "READER OFFERS PRICE (PP)" and listed room prices at "£1,799, £2,139, £2,479, £3,069, £3,625, £4,399, £2,869, £3,845".

b. The second ad stated "Explore the Exotic Islands of the Caribbean An incredible 28 night Voyage from Liverpool ...". A table titled "AMAZING READER OFFERS PRICES" showed the type of room against the "FULL BROCHURE PRICE (PP)" and the "READER OFFERS PRICE (PP)"; the full brochure price was always greater than the corresponding Reader Offers price.

Issue

Two complainants challenged whether the comparison between the full brochure price and the Reader Offers price was misleading, because they believed no one ever paid the full brochure price.

CAP Code (Edition 11)

Response

Reader Offers stated that they were an agent for Fred Olsen Cruise Lines, whose 'full brochure prices' were quoted in the ads.  They believed the ads suggested that the "FULL BROCHURE PRICE" was the maximum price charged, not the price consumers were currently paying for direct bookings with Fred Olsen.

They explained that Fred Olsen set all the prices for their cruises, including the prices at which agents could sell cabins on their behalf.  They said they were unable to prove that anyone had ever paid the full brochure prices, because they did not have access to Fred Olsen's sales information.

Reader Offers asserted that the practice of advertising the highest price at which a holiday may be available, but allowing fluid pricing below that, had official sanction from the Trading Standards Institute (TSI), the Association of British Travel Agents (ABTA), the Local Authorities Co-ordinators of Regulatory Services (LACORS) and the Federation of Tour Operators (FTO), because it avoided any holiday being sold at a price above that displayed in a brochure. They submitted a paper entitled "Trading Standards / LACORS Position Fluid / Flexible Pricing" and a supporting paper on fluid pricing dated 5 March 2001 to support that assertion.

The ASA contacted Fred Olsen who explained that, historically, they had always set 'full brochure prices' as a starting point but had offered early booking discounts to encourage advance reservations, reverting to full price after approximately a year.  As the departure date of the cruise drew near they had offered late discounts to top up sales.  They said, however, the market had become much more competitive over the last couple of years and the American owned cruise operators had begun to offer discounts continuously.  They argued that, because they had a relatively small market share, they were unable to advertise in a different manner from the market leaders, so they followed the industry norm by setting their brochure prices at levels similar to those of their direct competitors, then offering similar discounts.  They said their agents, such as Reader Offers, were drawn into the similar position of having to appear competitive and having to use similar pricing tactics to the market leaders.  They submitted copies of their competitors' advertising, which quoted "OUR Price" (the agent's price) against a "Brochure Price".

Fred Olsen said, as a result of the price competition, they had not sold a single booking at 'full brochure price' within the last year.  They stated that the closest sale to a 'full brochure price' was a 37.5% discount on a Christmas cruise.  They asserted that the full fare existed but discounts of various levels applied to all sailings.  They expected to sell cruises at higher prices next year, although a full sale price was unlikely.  They said they could not contemplate changing their pricing strategy as long as their competitors continued to offer discounts off their 'full brochure prices'.

Fred Olsen submitted details of the actual prices paid, to themselves or their agents, for bookings in 2007 for the St. Petersburg and Caribbean Island cruises promoted in the ads.  They said customers were always able to obtain a lower price, or extra benefits, by booking through an agent such as Reader Offers, because agents were in competition with each other and therefore usually offered further discounts or 'added value benefits' to the customer.

Assessment

THIS ADJUDICATION REPLACES THAT PUBLISHED ON 15 OCTOBER 2008.  THE COMPLAINT REMAINS UPHELD BUT THE WORDING HAS CHANGED.

Upheld

The ASA noted the "Trading Standards / LACORS Position Fluid / Flexible Pricing" paper stated " ... The TSI and LACORS are ... proposing the following compromise ... All Operators should quote a brochure price which will not be exceeded ... This maximum price quoted in the brochure should not be set so high that Tour Operators could show a discount all season, making the maximum price artificial.  No action would be taken against Tour Operators who quoted a genuine maximum price, which in isolated cases would not be reached ...".

We contacted the TSI, who explained that the position paper was an intermediate rough note on negotiations in 2001 and the compromise referred to was now of purely historical interest, because formal published Guidance had since been updated.  Moreover, they confirmed that the term maximum price in the position paper referred to the genuine highest price consumers actually paid for a holiday; it did not refer to a notional maximum quoted price which was never paid by anyone.  They said a higher price should not be quoted if it had never been charged over a full year.  They referred us to LACORS Guidance on Fluid Pricing dated 13 November 1996, which they said clarified their view of the holiday pricing situation; it stated "A maximum price in combination with an implication that there will be a discount on particular bookings causes great difficulties if there is a possibility that the maximum price may never be charged ...".  They also referred us to a version of the Guidance updated in 2008, which they said did not substantially differ from the original; it stated " ... Where a paper brochure exists, the legislation is clear that an accurate price must be conveyed to the consumer ... Some companies may have a policy of stating a higher price in their brochure for a package.  On booking the customer will be given the up to date price, which will always be less than the brochure.  LACORS is of the view that such a policy would not assist consumers in comparing packages and could become an unfair practice if the higher rate was never charged or if discounts off the price were introduced.  So this practice would not be encouraged ...".

We therefore understood that the practice of quoting the maximum price that would ever be payable, even if that price had never actually been paid, did not have official sanction.

We noted from the information Fred Olsen had submitted on the actual prices paid for cruise bookings that relatively few bookings were made directly through Fred Olsen; the vast majority of bookings were made through agents.

We noted not a single cabin sold at full price in 2007 for either the St Petersburg or the Caribbean Islands cruise; a discount always applied.  

We acknowledged that the Reader Offers prices paid tended to be slightly less than those paid through other agents.  However, we noted the ads stated "AMAZING READER OFFER PRICES" and showed differences of over £2,000 between the Reader Offers price and the 'FULL BROCHURE PRICE'.  We considered the ads suggested the Reader Offers price offered large savings off the maximum price whereas, in reality, the Reader Offers price represented only a slight saving on maximum prices actually paid.

We considered that consumers would expect that the cabin prices listed as "FULL BROCHURE PRICE" in the ads were genuine maximum prices which consumers actually paid.  However, we understood that those prices were meaningful only to Fred Olsen, who used them as a price setting benchmark.  We considered that, because no one ever paid the full brochure prices, they were meaningless to consumers and should therefore not be quoted in advertising.  We concluded that the comparison between the full brochure price and the Reader Offers price was misleading.

We noted Reader Offers, Fred Olsen and one of the complainants were concerned that other cruise operators followed the same practice of setting and quoting full brochure prices but constantly applying discounts to them such that no one ever had to pay the full advertised fare.  We were unable to establish whether that was the case but advised that such an approach was misleading.  

The ad breached CAP Code clauses 3.1 (Substantiation), 7.1 (Truthfulness) and 18.1 (Comparisons with identified competitors and/or their products).

Action

We asked the CAP Compliance team to inform the industry of the need to ensure brochure prices were genuine ones that consumers paid.  Provided it was satisfied the practice was widespread, the CAP Compliance team should consider allowing a suitable period of grace within which changes must be made.

Subject to any period of grace, we told Reader Offers that the ads must not appear again in their current form and that they must not quote brochure prices in their future advertising unless they were genuine ones that consumers paid.

Adjudication of the ASA Council (Non-broadcast)