Ad description
A catalogue for SDL Auctions property auction, which took place on 6 July 2017, contained a contents page that listed all of the lots for sale. Text at the head of the page said “All guide prices are subject to additional non-optional fees, including the buyer’s administration fee. Please see Important Notices in the catalogue for a definition of Auction Fees”. Each lot was listed with a price of either a fixed amount (for example, “£x”), a range (for example, “£x - £y”) or as “In excess of £x”. That price information was repeated amongst the detail provided regarding each individual lot, in each case prefixed with the words “*Guide Price” and followed immediately by “(plus fees)”. The asterisk linked to small print text at the foot of each page that stated “*Please see Important Notices for definition of guide price and auction fees”. The Important Notices were on page 5 of the catalogue and the section headed “DEFINITION OF GUIDE PRICES” followed 20 paragraphs under the heading “BUYING AT AUCTION” and a short paragraph under the heading “PROPERTY INSURANCE”. Text stated “DEFINITION OF GUIDE PRICES The guide price is an indication of the seller’s reserve price and is given to assist prospective purchasers. It is usual, but not always the case, that a provisional reserve is agreed between the seller and the auctioneer at the start of marketing. The guide price can be adjusted by the seller at any time up to the day of the auction in light of the interest shown during the marketing period. The guide price can be shown in the form of a minimum and maximum price range within which an acceptable sale price (reserve) would fall, or as a single price figure within 10% of which the minimum acceptable price (reserve) would fall. Please note the reserve price will not exceed the top end of the guide price but the actual sale price can exceed the guide price. On occasions the sale price does exceed the guide price significantly .That information was followed by a single paragraph headed “AUCTION FEES” and a subsequent section headed “DEFINITION OF RESERVE PRICE”, which stated “The reserve price is the seller’s minimum acceptable price at auction and the figure below which the auctioneer cannot sell. The reserve price is not disclosed and remains confidential between the seller and the auctioneer”.
Issue
The complainant, who believed that most of the properties (including lots advertised with a guide price of £1) sold for significantly more than the guide price, challenged whether the listed guide prices were misleading.
Response
CPBigwood Ltd t/a SDL Auctions said the Important Notices and FAQs sections at the beginning of the catalogue explained the guide price was an indication of the seller's reserve price which they believed was in line with relevant guidance. They said because the reserve price was kept confidential, it was important that the guide price was not always the same as the reserve price but was within 10% of the stated guide price, if a single figure guide price was given. SDL Auctions said the reserve price was the vendor's decision and they used a guide price that reflected the reserve price.
In one instance, the reserve price for certain lots was £1 and therefore the guide prices were also £1. Although due to lots of competitive bidding the eventual sale price substantially exceeded the £1 guide price, SDL Auctions said that if there had been only one person bidding for the property, it could have been bought for £1 and provided an example where this had occurred, in a recent sale in the North West of England. In that case, the property originally had a guide price of £5,000 with a reserve price of £5,000. SDL Auctions provided a copy of the auction catalogue showing the guide price for the lot. They said that, as the auction approached, there was clear lack of interest in the property and because the vendor wanted to ensure a sale, the reserve price was reduced to £1, and the guide price was also reduced accordingly, resulting in the sale of the lot for £1. Prior to this, an email alert was sent out to advise consumers that the price had changed the day before the auction to encourage interest.
They also said that they explained throughout their literature how they arrived at the guide price and they did not state at any point that the guide price was an indication of the likely sale price, which was completely unknown and could only ever be an educated guess.
SDL Auctions said their website stated on each set of property particulars that each property was sold subject to a reserve price, which was agreed between the seller and the auctioneer just prior to the auctions and it would be within plus or minus 10% of the guide price. They said the guide price was issued solely as a guide so that a buyer could consider whether or not to pursue their interest. Both the guide price and reserve price could be subject to change up to and including the day of the auction. A full definition of the guide price and reserve price could be accessed from that page by clicking a link which took a user to the Glossary. This provided further information including that the guide price was an indication of the seller's minimum acceptable price at auction at the time the property was entered into the auction and was given to assist consumers in deciding whether or not to pursue the purchase. The reserve price was stated as being the seller's minimum acceptable price at auction and the figure below which the auctioneer could not sell. In the property particulars section of the website, there was a document called Important Notices which contained the same information under the heading "definition of guide price" as that which was in the catalogue. It stated the guide price was an indication of the seller's reserve that it was subject to change and where the reserve price could fall if the guide price was a range or specific figure.
SDL Auctions said that the reserve prices were not set until a few days prior to the auction. In the instances where there were three guide price increases prior to the sale, in each case the reserve prices had increased the day before the auction. SDL Auctions said they increased the guide prices accordingly and the increased guide prices were added to an addendum sheet, a copy of which was provided for each of the lots concerned. The addendum was updated continuously prior to the auction and was available for download from their website. They said that they sent an email alert out a week before the Birmingham sale which had a link to the addendum sheet and there was also an email sent out the day before the auction, which again linked to the addendum.
SDL Auctions said they had difficulty providing dated proof of the guide price changes because their software system overrode previous addendum sheets so that only the corrected one was available. The last addendum sheet they provided was created on 5 July at 7:09 pm, (the auction was on 6 July) which included the guide price increases for the relevant properties. The addendum sheet containing the final amendments was also printed and given out to potential bidders as they entered the auction room. In addition an A3 version was also put on a large board by a registration desk. The auctioneer would make an announcement at the beginning of the sale to draw attention to the addendum, stating that they were available in the foyer. Then prior to the lots being offered, the auctioneer would have made it clear that the guide prices had increased.
Royal Institute of Chartered Surveyors (RICS) provided copies of current industry guidance for Auctioneers selling real estate along with the common auction conditions, which they said were currently under review, and said they were looking to publish revised guidance to reflect case law from 2016.
National Auctioneers and Valuers Association (NAVA) said their members were fully aware of the regulations and guidance subsequent to a previous ASA ruling through emails, magazines and at their annual auctioneers conferences. They said that issues arose over the estimate on a guide price of a property where it would attract interest from various types of prospective purchasers. In addition, a property may have a number of final uses whether it was development, conversion, access to another site or the marriage value to nearby properties.
Assessment
Not upheld
The ASA noted that the definition of guide prices and reserve prices SDL Auctions provided in the FAQs section of their catalogue stated a reserve price was the price stipulated as the lowest acceptable by the vendor and that it was confidential between the vendor and auctioneer. The section also stated that the guide price was not always the same as the reserve price but that where it was a bracket figure, the reserve would not exceed the top of the bracket or that if it was a single figure, the reserve could be up to 10% excess of this. The definitions provided in the Glossary section were similar and added that both the reserve and guide prices were subject to change. We therefore considered that consumers would understand that the guide price was not an indication of the value of the property or its likely sale price and that it was subject to change up until the auction. We also considered that consumers would understand that the nature of an auction was such that the price eventually achieved on a sale may well exceed the stated guide price.
We considered that guide price claims should be accompanied by clear and prominent information explaining the basis upon which the guide price was offered. This included its distinction from a reserve price; that it was an indication of the range within which the minimum acceptable sale price would fall or, in the case of single figure guide prices, it would be within 10% of the minimum acceptable sale price; and that both prices may be subject to change at a later date. We considered that, in order to ensure sufficient prominence, the qualification should either accompany each guide price figure or be clearly positioned within the marketing communication and linked to each one through the use of an asterisk or similar marker.
We noted that at the foot of each page of the July 6 Birmingham catalogue provided, SDL Auctions included the following statement: "Please see Important Notices for definition of guide prices and auction fees". The important notices section, and the FAQS sections of the catalogue contained definitions of guide prices and also a definition of the reserve price. We considered that was sufficient to ensure that the qualification was clearly positioned and prominent.
We noted SDL Auctions' explanation of the £1 guide prices for certain lots and we considered that in certain situations, a vendor's primary motivation was to ensure a sale. We noted that the guide price was adjusted when the reserve was reduced and that it was within the required range. Although the situation where a lot would sell for £1 was likely rare, SDL Auctions had demonstrated that where they had only received one bid for the property it could in reality be sold for the guide price of £1. We therefore considered that a guide price of £1 would be not misleading if it was within the prescribed range of the reserve price, and if the property could actually be sold for that price.
In the cases where the guide prices were changed, SDL Auctions provided evidence in the form of the auctioneer's bible entry – a record of changes, which demonstrated that the guide prices were increased to be within 10% of the reserve price. We noted that there was an addendum note which stated the increased guide price along with the reserve price, and that this would be announced prior to the auctioneer accepting any bids.
We considered that SDL Auctions' practice of routinely updating their guide prices up to the day before the auction would ensure that consumers always had the most up-to-date information. We noted that the email they sent to consumers a week before and the day before the auction, including a link to the Addendum, highlighting that it contained amendments to the original catalogue which drew attention to its importance to potential purchasers. We noted that SDL ensured that the Addendum was given to potential customers as they entered the auction room and the auctioneer also announced guide price increases prior to offering the lots for sale. We accepted that where guide prices were changed just before the auctions, some consumers may have attended the auction to purchase a lot based on a previous guide price which had subsequently changed, but that situation was likely to be unavoidable and we considered that SDL Auctions took sufficient steps to communicate changes as clearly as possible.
Because we noted that SDL Auctions defined guide prices and reserve prices prominently in their catalogues, that it was their policy to routinely update guide prices to ensure the 10% range was maintained and that they provided evidence to substantiate their procedures, we concluded that the guide prices were not misleading.
We investigated the ad under CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising), 3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation) and 3.17 3.17 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication. (Prices), but did not find it in breach.
Action
No further action necessary.
