A press ad, for Debenhams, stated "VAT FREE PRICES** ON FRAGRANCES*". Small print stated "**Discount is equivalent to the VAT payable on the reduced selling price".
The complainant challenged whether the ad was misleading, because it implied that products were priced at 20% less than the previous selling price.
Debenhams Retail plc said the claim "VAT FREE PRICES" meant they had taken the cost of VAT off the price of the products. They said, for example, that an item being sold for £100 did not have a price of £80 plus £20 VAT (£20 VAT being equivalent to 20% of £100). Rather, the product price was £83.33 and the amount of VAT added was £16.66 (£16.66 being equivalent to 20% of £83.33). The 'VAT free price' was the price of the product before the VAT was added to it; but the final selling price would have been reduced by 16.67% rather than 20%.
Debenhams Retail plc said they thought consumers would not be confused by the headline claim "VAT FREE PRICES", because they would understand that VAT was added to the retail price at 20% of that price. They said they would be happy to amend or remove the qualification to the headline claim if the ASA considered it to be misleading, but they considered it qualified the claim and did not detract from its accuracy.
The ASA understood the complainant believed that, because consumers were generally aware that the rate of VAT was 20%, they would understand the claim "VAT FREE PRICES" to mean that the usual selling price of the products (which was inclusive of VAT) had been discounted by 20%, which was not the case. We considered, however, that consumers would understand the claim to mean that the products had been discounted by an amount equivalent to the VAT which was charged on them; the products were priced at the pre-VAT price of the product.
We considered the qualifying text "Discount is equivalent to the VAT payable on the reduced selling price" could have been clearer as to how the discount had been calculated, but we considered it was not so unclear that it contradicted the headline claim or would cause consumers to be mislead as to the meaning of the headline claim. We concluded the ad was unlikely to mislead consumers.
We investigated the ad under CAP Code (Edition 12) rule 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising) and 3.9 3.9 Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify. (Qualification), but did not find it in breach.
No further action necessary.