Complaints against a Ford dealership, recently upheld by the
Advertising Standards Authority, over its claim "that we simply
refuse to be beaten", have highlighted again the problems that can
be encountered in relation to any claim relating to price.
The motor trade is but one industry sector which
competes heavily on price and, accordingly, runs a high risk of
breaching the law and regulatory codes which apply to the area.
However, all businesses must be equally aware of these rules as it
is not just headline price promises that are caught. Any
indication, inference, statement or claim as to price risks
- breaching criminal law
- being the subject of a civil law action, and/or
- breaching various regulatory codes.
The high profile Rover prosecution in 1994 over the
misleading use of small print to qualify a headline price, the MFI
prosecution in 1995 over its "Sale" prices and the Littlewoods
prosecution for misleadingly pricing three items in a catalogue are
further reminders of the need to be extremely vigilant whenever any
price claim, statement or indication is made.
In addition, the number of complaints upheld by the
ASA recently, which include Barclays Bank PLC ("Switch to a
Barclaycard and we'll give you up to £150"), Asda Stores Limited
("the Asda Chip Crusade") and Britannia Music Company Limited
("Take five CD's or cassettes and only pay for one"), suggests that
misleading price claims have become the subject of even closer
scrutiny in recent times.
Consumer Protection Act 1987
The Consumer Protection Act 1987 ("CPA") (section
20) provides that an offence is committed where a trader "in the
course of any business of his, gives... to any consumers an
indication which is misleading as to the price at which any goods,
services, accommodation or facilities are available."
"Consumers" include any persons who might wish to
be supplied with goods, services or accommodation for private
non-business purposes. "Price" means the total charge including all
extras such as VAT, call-out charges, delivery charges, hire
purchase instalments etc. "Misleading" is defined in section 21 of
the CPA to include any indication conveyed, or reasonably inferred
by consumers from the indication (or any omission from it):
- that a price is less than in fact it is
- that the applicability of a price does not depend on facts or
circumstances on which in fact it does depend
- that the price covers matters in respect of which an additional
charge is in fact to be made
- that the trader expects the price to be increased or reduced or
maintained (whether or not for a particular time or by a particular
amount) when he in fact has no such expectation
- that facts included (or omitted) on the basis of which
consumers might judge the validity of any comparisons (e.g. with a
manufacturer's recommended price lists) are not what in fact they
An offence will also be committed if
- a trader gives a price indication which becomes misleading
after he has given it, and
- some or all consumers might reasonably be expected to rely on
it at a time after it has become misleading, and
- the trader fails to take such steps as are reasonable to
The Code of Practice on Price
The DTI has published (under section 25 of the CPA)
a code of practice to provide guidance on what is likely to be
misleading. While a breach of the code is not an offence in itself,
it may be relied upon as evidence of a breach of the CPA. For
example, do not make statements like "Sale price £5" or "reduced to
£39" without quoting the higher price to which they refer and
clarifying the higher price, e.g. "our normal price". In any "Sale"
comparison with your own previous price, that previous price should
be the last price at which the product was available for at least
28 consecutive days in the previous six months at the same
Price Marking Order 1991
The Order requires unit prices of any products to
be accurately quoted in any advertising or marketing material which
refers to price. It does not, however, apply to advertisements
which simply indicate a recommended price. For example, most car
manufacturers' advertisements will be exempt but the Order will
apply to a local dealer advertisement. The cost of ancillary
products or services must also be shown as prominently as the main
price. Certain product groups, such as mobile phones, often fall
foul of this provision.
Consumer Credit Act 1974
In addition to the general provisions discussed
above, any advertisements indicating that the advertiser is willing
to provide credit or to enter into an agreement for the hiring of
goods will, if false or misleading to a material degree, breach the
Consumer Credit Act 1974 ("CCA"). Further, traders need to comply
with the Consumer Credit (Advertisements) Regulations 1989 which
govern credit advertisements.
Will I be prosecuted? A few cases
Limitations of "small print"
The prosecution of Rover confirmed that no amount
of small print will rescue fundamentally misleading headlines. The
words "the Metro Advantage for just £5,995" were qualified by very
small print: "Price correct at time of going to press. Excludes
£480 cost of 12 months road tax, number plates, delivery to the
dealer". Rover was convicted because the total purchase price was
"Sale" goods not at higher price for 28 consecutive
MFI did not follow the requirement in the Code of Practice on Price
Indications that goods indicated as on "Sale" at a reduced price
must have been on sale at the higher price for 28 consecutive days
during the preceding six months and were duly convicted.
"Insignificant" amount discrepancies
It is dangerous to assume that you will not be prosecuted over what
may seem to be a minimal price differential or a product sold at
very low cost. The German owned supermarket chain Aldi were
prosecuted over a 10p discrepancy in the price of a bunch of
It is a defence to proceedings under the CPA for a
defendant to show he took all reasonable steps and exercised all
due diligence to avoid committing the offence. Accordingly, you
should ensure that comprehensive and clear internal procedures are
in place, instructing staff on the relevant pricing legislation,
and make regular checks on compliance.
Malicious falsehood (trade libel)
To sue for malicious falsehood, a competitor has to
- a price statement has been published about himself or his
- the statement is false, and
- the statement was made maliciously, and
- the statement has caused actual or "special" damage or is
likely to do so.
The term "malice" has a special meaning for these
purposes, namely that the defendant made the statement, with
disregard as to whether it was true or false, or from an improper
motive. An improper motive can sometimes be shown from a
particularly fierce "knocking" campaign of advertisements between
competitors. A good example is the Compaq -v- Dell case. Compaq
succeeded in obtaining an injunction against Dell as a Dell
advertisement had not compared "like with like" (i.e. the systems
and their capabilities were different). Dell had also quoted the
lowest price available for its products whilst referring to
Compaq's manufacturer price lists and not the actual marketplace
cost which was substantially discounted.
Price statements can also, unwittingly, create
contractual relations. Typical examples include "never knowingly
undersold" and "if you can find it cheaper elsewhere we'll refund
the difference". In an 1892 case, an advertisement claimed that a
product guaranteed a cure for influenza and gave details of how
payment could be obtained if anyone suffered from 'flu after using
the product. This was held to be an offer to the world and binding
upon the company when someone followed the instructions,
nevertheless contracted 'flu and claimed the compensation
advertised. In the United States, PepsiCo was sued last year in a
similar fashion over its Pepsi Points promotion and an offer made
in an advertisement.
Under this promotion consumers could collect points
from Pepsi goods and redeem them to obtain various items, ranging
from a T-shirt (80 points) to a Harrier Jet (7 million points).
Consumers could also buy additional points. A student presented
Pepsi with a cheque for US$1,700,008.50 for the points he was
missing and asked for the Harrier Jet. Pepsi treated the request as
a joke and the student sued!
Trade mark infringement
A misleading price comparison may render an
otherwise acceptable reference to a competitor's registered trade
mark an actionable infringement.
The various regulatory codes governing advertisements, such as the
British Codes of Advertising and Sales Promotion ("BCASP") (Print)
and the ITC Codes (Television), must also be complied with.
Examples from BCASP include requirements that
prices be clear and relate to the product illustrated or shown,
include VAT, unless exclusively addressed to the trade, and make
any commitment to purchase additional goods clear.
Penalties and remedies
Companies and directors committing a criminal offence risk an
unlimited fine (if tried in the Crown Court) and, under the CCA, up
to two years imprisonment. In civil law there is the risk of
damages, an account of profits, costly litigation and an
injunction. Breaches of the regulatory codes can also result in an
advertisement being required to be pulled, in addition to adverse
Pricing: key points
Law and codes: a brief summary
- Under the Consumer Protection Act 1987 ("CPA"), you are guilty
of an offence if you give to consumers any indication which is
misleading as to price.
- "Misleading" is defined as including any indication or
-that the price is less than in fact it is; or
-that the price does not depend on certain facts or other purchases
(when it does in fact so depend); or
-that you expect a price to be increased, reduced or maintained
(when this is not the case); or
-that any facts or circumstances are relevant comparison criteria
as to price (when they are not).
- "Misleading" is also defined to include omissions, such as
neglecting to mention that an additional charge is also to be made.
- No amount of small print or asterisks will rescue any
fundamentally misleading price indication.
- Goods indicated as on "Sale" at a reduced price must have been
on sale at the higher price for 28 consecutive days during the
preceding six months.
- The Price Marking Order 1991 ("PMO") requires the price of any
additional goods/services, which must be purchased in order to
obtain an item, to be shown as prominently as the price of the
- Misleading price claims may also expose you to prosecution
under the Consumer Credit Act 1974 ("CCA").
- Beware civil claims, relating to, for example, prices misquoted
or unfair comparisons.
- A misleading price claim is also a breach of the British Codes
of Advertising and Sales Promotion and other relevant regulatory
codes such as the ITC's.
Many pricing claims and offences can be avoided by
following a few simple rules.
- Ensure, if additional goods or services must be bought to
obtain an item, that the cost of the additional goods or services
is shown as prominently as the cost of the item.
- Avoid ambiguous price statements, particularly those relying on
explanatory "small print".
- If making any comparisons, ensure criteria selected are
accurate, valid and verifiable; only compare "like with like".
- Retailers should instruct staff to make any necessary
additional purchases or charges clear to consumers, even if not
- Retailers should ensure that staff are aware of the
requirements relating to goods marked with a "Sale" price.
- Carefully review not just any comparative price claim or "price
promise" but also any materials referring to price and, in
particular, your price marking procedures.