Claims on the website www.auctionhouse.uk.net promoted properties to be sold at an auction in the North East. Each lot was listed together with a "Guide" price.
The complainant, who understood that several properties at a previous auction had had reserve prices higher than the guide prices and therefore could not be bought at the guide prices, challenged whether the listed guide prices were misleading.
Auction House UK Ltd responded together with the auctioneer. They explained that they were a franchisor and controlled the content and layout of the website www.auctionhouse.uk.net, and the auctions advertised were run by various franchisees who uploaded content, including guide prices, to the site.
They said it was important to note that, whereas guide prices for auctions were set at the beginning of the marketing period, a reserve price (the lowest price at which the auctioneer was authorised to sell the property during the auction itself) could be agreed much later. The policy operated by their franchisees was to set reserve prices just before the auction day, which ensured that the reserve could properly reflect levels of buyer interest as well as seller requirements. They stated that after the auction, the auctioneer, with the agreement of the seller, was able to sell at a lower figure a property that had not reached its reserve price, which might match or even fall below the quoted guide price. They operated an intensive post-auction sale process aiming to agree sales for lots that had not met their reserve during the auction.
Auction House stated that they followed industry best practice guidance produced by the Royal Institute of Chartered Surveyors (RICS), which recommended that reserves should sit within the guide price range. They noted that the guidance was less explicit as to cases where the guide price was stated as a single figure (such as "£20000+") rather than a range and said in those instances their policy, to which their franchisees generally adhered, was to set the reserve price at no more than 10% higher than the guide price, unless there was compelling reason to do otherwise and higher bids had been received for the property before the start of the auction (in which case the guide price would normally be raised accordingly). They supplied documentation showing the guide, reserve and sale prices for each property in their most recent auction, an extract from the RICS guidance notes and a link to YouTube videos produced by the National Association of Valuers and Auctioneers (NAVA) which contained information about attending auctions. The videos referred to a guide price as being an indication as to where the auctioneers felt that the final sale price should be, and noted that the reserve price should generally not be more than five to ten per cent above the guide price.
Auction House noted that reserve prices were typically kept confidential, by agreement with the seller, and said routinely updating guide prices to align with reserves set on the day of the auction would effectively publicise the confidential reserve, as well as being an excessively onerous process. They further considered that such action would be unnecessary. They stated that a significant proportion of their properties were sold after the auction itself, at prices below the reserves. They considered that a guide price would not become misleading at the point that a higher reserve was established, because it remained the case that the property in question could sell for the guide price, or even lower, after the auction had taken place. They also commented that it would not be in sellers' interests to deter buyers willing to pay the guide price from attending the auction, because many could succeed in doing so after the sale itself.
The ASA understood that it was common practice within the auction industry to set a guide price at the beginning of the marketing period for the auction and that a reserve price would often be set at a later date. We noted that guidance issued by RICS to auctioneers selling real estate advised that, where a guide price was given, a clear definition of the basis upon which that was offered ‒ such as "the seller's minimum price expectation" or "the currently anticipated sale price at auction" ‒ should also be stated. The guidance further advised that a guide price clearly below the level which the seller would accept was misleading and, in cases where the reserve price may be altered after marketing had begun, the auctioneer should avoid giving a guide price range in which the higher end of the price range was below the anticipated price at which the property would be available for sale. If the reserve price changed beyond that range before the auction, the earlier guide price might become misleading and should be adjusted accordingly. It also stated that auction catalogues should clearly indicate that guide prices might be subject to amendment during the period leading up to the auction.
We noted that Auction House's policy was to establish the reserve price only shortly before the auction day, and that the reserve price would typically sit within the stated guide price range or no more than 10% higher than a guide price that was stated as a single figure. The documentation supplied in respect of the most recent auction indicated that over half of the properties had not been available for sale during the auction at the lowest price indicated by the guide price stated on the website, but that the vast majority of the reserve prices had been set within, or at the upper bound of, the guide price range or within 10% of a single-figure guide price.
We considered that, without further explanation accompanying the prices, consumers would understand a "Guide Price" to be a reasonable estimation of the price they could expect to pay for the property at the auction itself, and would not be aware that a reserve price could yet be set that might affect the minimum sale price. We considered that, in order to ensure that consumers were not misled as to the significance of the guide prices, such claims should be accompanied by clear and prominent information explaining the basis upon which the guide price was offered, including its distinction from a reserve price that could affect the minimum sale price during the auction, and the fact that it may be subject to change at a later date. In particular, unless the marketer routinely updated their guide price where a reserve was subsequently set that was higher than, or higher than the lower bound of, the guide price, the qualification should clearly position the guide price as an indication of the range within which, or, in the case of single-figure guide prices, within ten per cent of which, the minimum acceptable sale price would fall, so as to make clear that the property might not be purchasable at the lowest figure stated. 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 understood that it was not Auction House's practice routinely to update their guide prices where the lower bound fell below a reserve price. The web page showing the list of lots for the auction and their guide prices did not define or qualify the guide prices in any way. We noted that the auction catalogue, downloadable from the web page, contained the definition: "Guide prices quoted in the catalogue are provided as an indication only and may change at any time prior to the auction. The sale price will be dependent on bidding in the auction room and on the Vendors' instructions". However, we considered that that was insufficiently prominent in respect of the guide prices quoted on the website and did not clearly enough explain the significance of the guide price. We therefore concluded that the guide price claims on the website were misleading.
The claims breached CAP Code (Edition 12) rules
Marketing communications must not materially mislead or be likely to do so.
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means. (Misleading advertising) 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).
The claims must not appear again in their current form. We told Auction House UK Ltd to ensure that each of their guide prices was clearly and prominently qualified, for example through the use of an asterisk to further text, by an explanation of the basis upon which it was offered, its distinction from a reserve price that could affect the minimum sale price at auction, and the fact that it was subject to change. We told them to ensure, unless they routinely updated their guide price where a reserve was subsequently set that was higher than the lower bound indicated by the guide price, that the text clearly positioned the guide price as an indication of the range within which, or, in the case of single-figure guide prices, within ten per cent of which, the minimum acceptable sale price would fall, so as to make clear that the property might not be purchasable at the lowest figure stated.