Having a sale is a simple way to boost trade, but what are you legally allowed to do? And how do the multiples manage to always seem to have a permanent discount? Legal expert Poppy Williams looks at the rules...

Consumers may be forgiven for thinking that the recent overhaul of consumer protection legislation has done little to rein in the questionable selling practices of some retailers.

The problem for the majority of high street brands is that, in some instances, they are being tainted by the offending few.

The Consumer Protection from Unfair Trading Regulations 2008 - the CPRs - came into force in May 2008 and introduced a general prohibition against misleading practices as well as a number of specific banned techniques.

Importantly for retailers, breaching the regulations amounts to a criminal offence, exposing businesses and the individuals who run them to unlimited fines or a maximum of two years' imprisonment.

Nearly three years down the line, despite these serious criminal sanctions, some retailers appear to have more freedom than ever before to use wide-ranging and often ambiguous price promotions.

For example, stores that appear to have permanent sales or even closing down sales all year round; offers that look too good to be true but when you dig down into the detail they are far less attractive than they first appear; and multi-buys where the individual product price appears to have been deliberately inflated.

So how is it that a minority of retailers are able to get away with this, while the vast majority of good, honest retailers feel they are being left behind or being put at a commercial disadvantage by such practices?

Contrary to what some practices suggest, a sale must have a specific end date and must be genuine. Some retailers do appear to have one long continuous sale, but what they may be doing in actual fact is rotating the stock that is on offer. By way of example, if a retailer stocks a number of different furniture ranges, they may place a proportion of those ranges on sale for a specific period of time and when that period comes to an end, place some or all of the remaining furniture on sale, again for a specific period of time and so on.
Each offer may well amount to a genuine sale, however some would argue that the practice as a whole is misleading to the consumer.

Importantly for retailers, to be a genuine sale, price comparisons should also adhere to recent guidelines. For instance, where the basis is not set out explicitly, any price being used as a comparison should be the most recent one available for 28 consecutive days or more. Equally, the period of time for which the new (lower) price will be available should usually not be any longer than that for which the old (higher) price was available.

If that is not enough, the old (higher) price must also be a genuine retail price and should not be set artificially high so as to make the sale price appear more attractive. One of the factors that determines whether the old (higher) price was a genuine retail price is whether a retailer might reasonably expect that they could sell a significant number of goods at that price.
This seriously casts doubt over the legality of a minority of retailers selling products with very high mark-downs over lengthy periods of time.

Retailers also must be wary of the need to compare like with like. For example, if a retailer wants to sell ex-demonstration equipment at a discount price, they should ensure that the equipment is clearly marked as such. Otherwise, consumers will automatically compare the discounted (ex-demonstration) product with similar new products and think that they have a better deal than they have.

'Closing down' sales are also subject to the regulations. While retailers can, and do, have ongoing sales, a continuous closing down sale is a different matter. This practice is likely to fall within the category of banned practices and, equally, expressing that something is for a limited time only when it's not is prohibited and doing so may lead to prosecution, a hefty fine and possible imprisonment.

Too good to be true?

 

We have all, at some point, been tempted by an offer that, on the face of it, appears to be a fantastic deal, but leads to disappointment when we learn of hidden costs such as administration fees, credit card surcharges and so on. Similarly, some of us may have been enticed into a store by promises of heavily discounted stock only to find that just a very small proportion of the stock is covered.

Whether or not these practices are actually in breach of the regulations, and therefore illegal, will very much depend on the circumstances, such as the content, timing and form of the information the customer was given. But these practices - known as "drip pricing" and "baiting" respectively - are a particular concern of the Office of Fair Trading.

Advice to the minority of offending retailers who carry out such practices is to be very careful to ensure that customers are given clear advance notice of any extra costs and, above all, take all reasonable steps to ensure your customers are not misled.

BOGOF

 

When it comes to the multiple buy offer, two questions come to mind. Firstly, are they actually a good deal? And secondly, do we really need more than one of the products on offer?

Some may argue that consumers are free to make their own assessment, particularly in relation to the second point, and often well-known high-street retailers will offer their customers genuinely good and perfectly legal deals. However, if some retailers are artificially inflating the individual product price to make the multiple product price appear more attractive, surely this is misleading and so illegal?

Guidance would suggest so, but it seems that some offending retailers are currently treading a fine line between deliberately inflating the individual product price and imposing a genuine retail price, albeit increased. How then can we tell the difference?

In order to prove that the individual product price has not been deliberately inflated, a retailer may be required to show that the individual product was previously on sale at the higher price for a reasonable period of time. Unfortunately, not many of us have this sort of information to hand at the time of purchase.

Misleading

 

For retailers, the key to complying with these regulations is to take all reasonable measures to ensure that the average consumer is treated fairly and is not misled. But how much can retailers reasonably expect consumers to know?

Retailers may justifiably argue that consumers make sophisticated judgements every day about prices and value within, and between, stores and there is a wealth of information available to do so.

In fact, the test to be applied when determining whether a consumer has been misled is whether the average consumer would not have bought the product if they had they been given accurate information. The problem for consumers is that many of us do not have the time to carry out detailed price comparisons and so, to a degree, we are reliant on retailers not to mislead us and indeed, most retailers operate this way.

How far offending retailers are able to push the boundaries of the law will depend on the approach the regulators take and whether they are willing to take some of the worst offenders to task.

The Office of Fair Trading is said to be getting tough over misleading price offers, but in this economic climate and the inevitable lack of resources, some would question whether they will have any significant impact.

In the meantime, advice to retailers is simple - ensure you have all reasonable measures in place to prevent your customers being misled. If you can show this, there is a good chance you will stay out of court.

What happens if you're caught out?

 

It's the Office of Fair Trading, local authority Trading Standards Services and the Department of Enterprise, Trade and Investment in Northern Ireland who have a duty to enforce the Consumer Protection from Unfair Trading Regulations 2008.

Their enforcement officers may use their powers to inspect goods and enter business premises to investigate possible breaches of the law. Where they have reasonable cause to suspect that a breach of the CPRs has occurred, they will also be able to require traders to produce documents relating to their business - but not those that are legally privileged.

If you are found guilty of a criminal offence under the CPRs, then you could face a fine not exceeding £5,000 in the Magistrate's Court or, on conviction on indictment in the Crown Court, a fine or imprisonment up to two years, or both.

Defences

 

The well recognised but important defence of 'due diligence' is the main argument available to businesses for breaches of the CPRs. It must be shown that the commission of the offence was because of a mistake, reliance on information given by another person, the act or default of someone else, an accident or another cause beyond the control of the accused. It must also be shown that all reasonable precautions were taken and all due diligence was exercised to avoid committing the offence or to prevent someone under his control from committing it. It is not sufficient to show due diligence procedures were in place, it is also necessary to show they were applied in practice.

Poppy Williams is a solicitor in the Litigation and Regulatory Group of
DLA Piper UK LLP.