OFT guidance on discounted price claims
17 August 2006
In June, the Office of Fair Trading published a consultation on draft guidance for businesses that advertise in non-broadcast media price discounts against their previous prices. The OFT wrote the guidance in response to the court judgment against the Officers Club. The judgment clarified the criteria that are relevant to Trading Standards or the OFT in deciding whether the advertising of price discounts is misleading. The guidance is available electronically on the OFT website at www.oft.gov.uk/News/Consultations/advertising+own.
The Officers Club advertised “70% off everything” but the Court decided that the ads were misleading because the reference prices were not ‘genuine’ prices. For a price to be genuine, the draft guidance suggests three criteria that should be met:
- the seller should honestly believe significant sales would result at that price and
- the seller should have had a significant quantity of products on sale at that price and
- for long enough for potentially interested consumers to become aware and decide whether to buy.
To allow sellers, regulators and the courts flexibility in deciding whether an advertised discount is legal, the draft guidance deliberately does not define the criteria.
The draft guidance imposes a new, higher legal hurdle for discounted price claims and we urge all those likely to claim discounts from previous prices to read it. As far as compliance with the CAP and BCAP Codes are concerned, past ASA adjudications have already gone a long way towards imposing the same criteria on judgments of whether ads for discounted prices are misleading. No doubt the ASA will bear the OFT draft guidance in mind in future when judging whether, in both broadcast and non-broadcast media, high claimed previous prices are realistic or misleading.