Furniture and carpet retailers change pricing practices after OFT investigation

[Legal Beagles]

Five furniture and carpet retailers have changed their pricing practices following an OFT investigation.

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[Amethyst]

Re: Furniture and carpet retailers change pricing practices after OFT investigation

Five furniture and carpet retailers have changed their pricing practices following an OFT investigation.

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Furniture and carpet retailers change pricing practices after OFT investigation

19/14 21 March 2014
Five furniture and carpet retailers have changed their pricing practices following an OFT investigation.
A Share & Sons Limited (trading as 'SCS'), Carpetright Plc, Dreams Limited, Furniture Village Limited and Homestyle Operations Limited's trading brands 'Harveys' and 'Bensons for Beds' have each confirmed their commitment to using genuine reference prices and, without any admission of liability, have made changes to their reference pricing practices. The OFT has therefore closed its investigation.
Reference prices are used by retailers across their sector to advertise a bargain to shoppers, for example by comparing a lower current price against a higher past price such as 'Sale, Was £800, Now Half Price £400'.
The OFT believes that consumers should be able to trust that such price comparisons are fair and meaningful and that the advertised savings (or 'price advantage') are genuine. Improper use of reference prices can mislead consumers, for example in circumstances where the 'discounted' price is in fact the normal retail price of a product.
Gaucho Rasmussen, OFT Director, Goods and Consumer Group said: 'Retailers advertise bargains and discounts by referring to a previous or future higher price. It's a powerful marketing tool which, when used properly, provides a helpful and easy way to demonstrate to shoppers the value of discounts and savings.
'We are therefore pleased that these retailers have confirmed their commitment to using genuine prices.'
Alex Chisholm, Chief Executive of the Competition and Markets Authority (CMA), which succeeds the OFT on 1 April, said:
'The CMA will monitor pricing practices within this sector to check whether businesses are complying with their legal obligations. Companies are advised to satisfy themselves that their practices are in line with the law because failure to do so could risk enforcement action.'
NOTES

1. There are further details on this case, including a non-exhaustive list of factors that the OFT considers when assessing whether a reference price is genuine, on the project webpage.
2. The Consumer Protection from Unfair Trading Regulations 2008 contain a general prohibition against unfair commercial practices and, specifically, prohibitions against misleading actions, misleading omissions and aggressive commercial practices. The Regulations are enforceable through the civil and criminal courts. See further information and advice for businesses.
3. On 1 April 2014, the Competition and Markets Authority (CMA) will become the UK's lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the Office of Fair Trading and the responsibilities of the Competition Commission, as established by the Enterprise and Regulatory Reform Act 2013.

[Amethyst]

Re: Furniture and carpet retailers change pricing practices after OFT investigation

Commitments

Following the investigation, all the remaining retailers have confirmed a commitment to the use of genuine reference prices and, without any admission of liability, have made changes to their reference pricing practices. On the basis of the commitments received the OFT has closed its investigations

Next steps

After 1 April 2014 the Competition Markets Authority (CMA) will monitor pricing practices within the sector to check whether retailers are complying with their legal obligations.

When considering if it would be appropriate to take action in the future, the CMA would be assisted in reaching a decision by the OFT's non-exhaustive set of factors. The OFT will be sharing its views with the wider enforcement community, including Trading Standards Services, and industry bodies to encourage wider compliance within the sector.


Non Exhaustive List of Factors



OFT has identified the following non-exhaustive list of factors, which would lead it to question whether genuine reference prices were being used.

1. Relative volume of units sold: Whether the reference price is the price at which the retailer has sold a significant number of units of the product relative to the number of sales at the discounted prices. The greater the proportion of sales made at the higher price the less this will call into question whether that higher price was a genuine retail price.
2. Legitimate expectations: Whether the reference price is a retail price at which the retailer has a legitimate expectation of significant sales of units of the product relative to the number of sales at the discounted prices. The following practices suggest a lack of legitimate expectation:
   
   i. Repeated use: Whether the retailer repeatedly uses a reference price, when the retailer knew that it had not sold a significant number of units of the product at the reference price relative to the number of sales at the discounted prices.
   
   ii. Duration: Whether a reference price is advertised to show a specific price advantage and/or discount, in circumstances where the sale price has been used for longer than the reference price, whereby the sale price has, in fact, become the usual retail price.
   
   iii. Proportion of stores: Whether the reference price was used in all or a significant proportion of stores before and/or after the advertised discount.
   
   iv. Online: Whether a reference price was available on a retailer's main online store or only through a secondary or lower profile business or website, before being used to promote savings and/or discounts in all its stores.
   
   v. Parallel discounts: Whether, during the time that the reference price is the current retail price, a retailer runs parallel discount offers to attract sales. For example, by offering money off vouchers, in store discounts and/or 'bundling' offers whereby discounts are offered for multiple purchases