Summary of Council decision:
Five issues were investigated, all of which were upheld.
Three ads promoting Madbid.com, a pay-per-bid penny auction website, seen on 29 July 2016:
a. Madbid's own website www.madbid.com, featured text on the home page stating "You can save up to 89% with our offers". In the "LIVE auctions" section, various products were shown including an "iPhone 6 - 16GB 4G ... RRP £539.00" and a "Mini ONE ... RRP £12,145.00".
Text on another page headed "Recently Closed Auctions" included various products accompanied with RRP claims, including a "BRAUN Series 9 Shaver RRP £299.99" and "KENWOOD Titanium Major Mixer RRP £599.99".
A pop-up box stated "OH NO, CREDITS RUNNING LOW! ... Enjoy seemless [sic] bidding with Auto Top-up. By using it you save time. When your credit level falls below a threshold, your account gets automatically topped up with 250 credits! There is a £24.99 charge per auto top-up ... ENABLE AUTO TOP-UP ... Your benefits: Get £5 FREE credits ... Offer ends in 1 minute".
b. A website, www.megabargain24.com, stated "How to Save 95% on an iPad 4 or iPhone 5?" and further text, written in the style of an article, explained how the author had won items using Madbid. Text stated "Create an account on MadBid and get your free credits. Click our exclusive link to get a discount and the same offer as I did! (expires Saturday, 30 July 2016) Code: STARTER24 ...".
c. A paid-for search result on Bing.com stated "Save Up To 98.8% On New Products! ... Visit MadBid.com ...".
The ASA challenged whether:
1. ad (a) was misleading, because it did not make sufficiently clear how the auction process worked, including the costs involved and the fact that consumers could only win an auction a limited number of times in a month;
2. the claims "You can save up to 89% with our offers!" in ad (a), and "Save Up To 98.8%" in ad (c) were misleading and could be substantiated;
3. the RRP claims in ad (a) were misleading and could be substantiated;
4. the commercial intent of ad (b) was unclear; and
5. the claims "Offer ends in 1 minute" in ad (a) and "expires Saturday, 30 July 2016" in ad (b), were misleading and could be substantiated.
1. Marcandi Ltd t/a Madbid believed the way the auctions worked was clearly explained on the landing page of their website. They referred to a graphic which was headed "How does the site work". It stated "Use credits to place a bid. Wait for the timer to reach zero. If someone bids the timer restarts. If no one else bids, you're the winner! If you don't win, you get your money back as Earned Discount". They believed that, in addition to a video also on the landing page, clearly explained to users how the site worked.
In relation to the policy of limiting the number of wins per month, Madbid explained that only 0.02% of users had reached the limit on the number of wins in the previous six months. They considered that this information was not relevant to more than 99% of users and therefore had not included it on their landing page.
2. & 3. Madbid explained that to work out the RRP, they carried out a search on Google to see what other retailers were selling the product at. They explained that in the case of the Kenwood Titanium Major Mixer KMM020, the RRP set by the manufacturer was £729.98 but because market prices on average changed considerably, they set their RRP based on all the online prices available at the time the product was launched on their site. They provided a list of the the results of their online search. They explained that the price listed by other retailers for that item ranged from £432.55 to £694.97. They decided on an RRP of £599.99 as that was closer to the higher end of the range, but was still cheaper than the most expensive option available.
In relation to the iPhone 6 (16GB 4G), Madbid said that for Apple products they always used the price at which the item was sold on the Apple website as the RRP. In this instance, that was the same price as the product was listed at on the Amazon website.
Madbid provided a list of their online search results for the BRAUN Series 9 - 9090cc shaver. The prices for that product ranged from £176.79 to £320.54 and they set the RRP as £299.99, closer to the higher range but cheaper than the most expensive option available.
In the case of the Mini ONE car, Madbid explained that this particular model of car was no longer on the market, so they had used the RRP from the manufacturer at the time the car became available.
They provided another example for a Tefal 10 Litre Clipso Control Pressure Cooker which they had given an RRP of £189.99. The prices of the online retailers found on their Google search ranged from £162.97 to £209.99. As with the Kenwood Mixer, they set the RRP closer to the higher end of the range but ensured it was still cheaper than the most expensive option available.
Madbid explained that ad (c) was being served by an affiliate network and they had asked them to remove the ad. They provided a spreadsheet showing the auctions that had closed in the previous six months, excluding credit package auctions. The spreadsheet showed the amount of savings each customer had achieved. Using the weighted average, their calculations showed that 35% of auctions closed at a discount of 89% or more off the RRP, far more than the 10% required for "up to" claims. Using a simple average calculation, 26% of auctions had closed with a discount of 89% or more off the RRP.
4. Madbid explained that they were no longer driving traffic to that web page, which contained old content and was no longer used by them. They said they had removed the page in question.
5. As stated above, Madbid had removed ad (b). In relation to ad (a) they explained that the purpose of the pop-up was to enable users to top up their accounts during the bidding process in a matter of seconds. When bidding to win, users generally did not have time to go through a lengthy credit package purchase process as the auction could close by the time they had topped up their credits. The time limitation in the pop-up box was to ensure that users did not run out of credits when they needed them the most. Nevertheless, Madbid said they were willing to make changes to the pop-up.
The ASA considered that, in the absence of any information to the contrary, consumers were likely to assume that there were no costs associated with bidding, that they could participate in as many auctions as they wished and that there were no additional delivery charges for any items they won in an auction.
We noted that the graphic referred to by Madbid appeared towards the bottom of the home page and considered it was likely to be missed by consumers. In any event, we noted that it explained that credits would be needed to place a bid but it did not explain what the cost of those credits were, and how many credits were needed per bid. It also did not explain that a winning bidder would also have to pay the auction price of the item and shipping costs. We understood that the "landing page" referred to by Madbid was a page consumers could only view after they had registered with Madbid. We noted that that page explained that credit packages ranged from £27.99 for 275 credits to £374.99 for 3750 credits and stated that the number of credits per bid required was specified on each auction page. In the video on that page an example was given in which 10 credits were required per bid.
We considered that information regarding the cost of credit packages, how many credits were required per bid, delivery cost information and the limit on the number of auctions that a user could win in any one month, was material information that consumers required to be able to make informed decisions about the service, including the decision to register. Because that information was not available to consumers until after they had registered with Madbid, or in the case of the winning limits not at all, we considered that the ad was misleading.
On that point, ad (a) 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).
2. & 3. Upheld
The ASA considered that consumers would understand the quoted RRPs to represent the prices at which the products were generally sold by other retailers, and would understand the savings claims to represent the auction price (including the cost of bids) compared to the price at which the item was generally sold.
We noted that Madbid carried out an online search on Google shopping to try to ascertain the price at which other retailers were selling the item. In most of the examples provided, there was a significant variation between prices and Madbid had used a notional price that was towards the higher end of the range, but below the highest price available. We considered that was not the price at which those products were generally sold. In the case of the Mini ONE car, we understood that Madbid had used the RRP which had been set by the manufacturer because that model of car was no longer on the market. We considered that the RRP set by the manufacturer was not the price at which the product was generally sold and in the case of a product that was no longer on the market, it would not be possible to demonstrate the price at which it was generally sold.
In the case of the iPhone 6 (16GB 4G), we noted that only four examples were provided. Of those, one appeared to be a second-hand iPhone listed on eBay and one ad appeared to be for the purchase of the phone under a contract. Two other ads listed the product at £539.00 and £469.99 respectively. The screenshot of the Apple ad provided did not list a price. We considered that because only two relevant examples were provided, whereas there would have been more sellers on the market, and one of those had a lower RRP than that used by Madbid, they had not demonstrated that £539.00 was the price at which the iPhone 6 was generally sold across the market.
We considered the spreadsheet provided. We noted that the savings were based on RRPs compared to the auction price plus cost of bids. We considered that because we had not seen adequate evidence that Madbid's RRPs were the prices at which the products were generally sold, the purported savings in the spreadsheet had not been substantiated.
For those reasons, we concluded that the RRP claims and savings claims had not been substantiated and were misleading.
On those points, ads (a) and (c) breached 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), 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) and 3.40 3.40 Price comparisons must not mislead by falsely claiming a price advantage. Comparisons with a recommended retail prices (RRPs) are likely to mislead if the RRP differs significantly from the price at which the product or service is generally sold. (Price comparisons).
We noted that the ad was headed "How to Save 95% on an iPad 4 or iPhone 5?" and was written in the style of an article. We considered consumers were likely to believe it was editorial written by a journalist who had researched pay-per-bid auction websites and was describing their experience of using Madbid. For example, it stated "You've probably noticed a new phenomenon spreading like wildfire across Europe and North America: auction sites selling warehouse clearouts & overstocked products for huge discounts ... After hours of research, I came to the conclusion that, because of its wide range of products and excellent reputation - Madbid was the site for testing ... For only £28.22 in total I got an iPad worth £499! … I was completely satisfied with my experience ...".
While we noted that small print under the heading text stated "By Madbid - Sponsored Content", we considered the presentation of that text was not sufficiently clear and it was likely to be missed by consumers. We considered it was therefore unlikely to counter the impression that the piece was editorial written by a journalist, rather than a marketing communication. Because of that, we concluded that the commercial intent of the ad was unclear and that it therefore breached the Code. We welcomed Madbid's assurance that the ad had been removed.
On that point, ad (b) breached CAP Code (Edition 12) rule 2.3 2.3 Marketing communications must not falsely claim or imply that the marketer is acting as a consumer or for purposes outside its trade, business, craft or profession; marketing communications must make clear their commercial intent, if that is not obvious from the context. (Recognition of marketing communications).
In relation to ad (a), we understood from Madbid's response that the purpose of the countdown clock in the pop-up box was to ensure that users did not run out of credits during a live auction they were bidding on. However, we considered it gave the impression to consumers that the offer of £5 free credits was only available for the time remaining, and we had not been provided with evidence to show that was the case. For those reasons, we considered that the claim "Offer ends in 1 minute" had not been substantiated and was therefore misleading.
In relation to ad (b), we noted that Madbid had not provided any evidence to show that the free credit offer expired on 30 July 2016. Because of that, we considered that the claim had not been substantiated and was therefore misleading.
On that point, ads (a) and (b) breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising) and 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).
The ads must not appear again in their current form. We told Marcândi Ltd t/a Madbid to ensure their ads made clear how the auction process worked, including the costs involved and the fact that consumers could only win an auction a limited number of times in a month. We also told them not to make savings and RRP claims unless they held adequate substantiation for them, to ensure the commercial intent of their ads was clear, and to ensure that any claims regarding the expiry of offers could be substantiated and were not misleading.