Online pricing, unfair practices and consumer protection

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High street jeweller H Samuel has been fined for providing misleading pricing information online. The case highlights both what retailers can and can’t do when it comes to posting prices and promotions; and a new national and international drive towards the enforcement of consumer protection laws.  Retail and Commercial Dispute Resolution specialist Gwendoline Davies explains and offers practical advice

Why is this case important?

Signet Trading Limited, the owner of high street jeweller H Samuel has been fined for providing misleading pricing information online. The case highlights both what retailers can and can’t do when it comes to posting prices and promotions; and a new national and international drive towards the enforcement of consumer protection laws.

What can retailers do?

If faced with prosecution under the CPRs, it may be possible to raise a defence if the offence was committed because of a mistake, reliance on information supplied by another, another person’s act or default or because of some other accident or cause outside the retailers control; and if all reasonable precautions and due diligence were undertaken to try to avoid commission of the offence in the first place.

It will not be possible to raise the due diligence defence if a retailer knowingly or recklessly allows its or its employees’ conduct to fall below honest and professionally diligent standards.

There are, however, some practical steps that retailers can take to avoid commission of CPR offences. Following these should also provide retailers with evidence to support a due diligence defence if and when any complaint, investigation or prosecution is instigated:

  • Providing training to all staff involved, directly or indirectly, with the sales and marketing (including production of hard and soft copy materials) of your services/products and retaining records and evidence of such training achievements.
  • Taking care that all information, online and in all other forms, that is gathered and presented to consumers (potential and actual) is accurate, fair, not deceptive or misleading and does not leave out material facts. Having safeguards in place as to the accuracy and security of all such information.
  • Updating (or introducing) policies and procedures regarding the review/maintenance/correction and updating of marketing material and other consumer-facing information.
  • Signposting consumers to any publicly available information which might affect or assist with their transactional decision.
  • Maintaining a comprehensive audit trail of all these efforts.
  • There are also some tools that can be deployed in defence of any complaint if necessary:
  • Firstly, is the complaint actually time-barred? There is an applicable limitation period which provides that no prosecution can be brought more than three years after an offence was committed or one year after the discovery or report to trading standards, whichever is the earlier.
  • Secondly, can a complaint be negotiated away? (If it can, note that negotiating a settlement with a consumer complainant may not, of itself, prevent a prosecution, and it may not guarantee confidentiality.) Retailers should seek specialist legal advice to assist with any settlement negotiations and to make sure that any agreements are properly documented and include confidentiality obligations.
  • Treat every customer and potential complainant fairly, politely and professionally, and be honest and open in all dealings, so as to foster good relationships. Good customer relations can avoid or quickly resolve complaints and can help to avoid reports to the authorities.
  • Finally, consider whether the due diligence defence can be raised.

Understanding unfair commercial practices – what retailers need to know

The Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) prohibit businesses from engaging in unfair commercial practices in their dealings with consumers.  Crucially, consumers are not only those people who actually buy from or pay a business – they also include anyone who is a prospective customer.  It is a breach of the CPRs to give information to consumers that:

  • Is misleading to a material degree.
  • Relates to one or more pieces of information which consumers are likely to take into account when reaching a transactional decision (such as the nature of a product or service, specification, price, locality, sales service, terms of sale, incentives or other aspect or characteristic of the product/service).
  • Causes or is likely to cause the consumer to make a different transactional decision.

Information might be misleading because it contains false information or because it is deceptive or likely to deceive a consumer even if, strictly, it is factually correct. This can include information which is given verbally, in writing or visually.

Giving false or misleading information under the CPRs also specifically includes any commercial practice or marketing which creates confusion with competitors’ products or services and advertising that you are bound by any code of conduct, but not adhering to that code.

The CPRs require businesses to be proactive. They impose a duty to disclose material information that a consumer needs to make an informed transactional decision. A common trap for the unwary is that liability for misleading by omission cannot be avoided if you do not know the material information, but have taken no reasonable steps to find it out.

The CPRs also prohibit commercial practices which intimidate or exploit consumers; which restrict or are likely to restrict how they act or make choices; utilise harassment, coercion or undue influence; and/or which significantly impair or limit or are likely to impair or limit a consumer’s freedom of choice.

Finally, the CPRs place a general prohibition on commercial practices where a business fails to act in a professionally diligent manner in accordance with honest market practice and/or good faith and they list, at Schedule 1, 31 specific “banned practices” [1].

The reach of the CPRs is wide, as are the enforcement provisions, which attract both civil and criminal liability. Depending on the circumstances, breach of the CPRs can result in unlimited fines and/or up to 2 years’ imprisonment.  Reputational consequences can also, of course, be devastating.

H Samuel case

In the recent case, Torfaen County Borough Council’s trading standards team pursued a prosecution in respect of the misleading pricing of a range of diamond rings on the H Samuel website. The charges related to the relatively common practice of using reference price promotions.  H Samuel’s website had failed to inform consumers that items had previously been on offer for sale at lower ‘intervening’ prices.  Customers were therefore unaware whether they were receiving a genuine bargain. Signet cooperated with the council’s investigation and pleaded guilty to what the judge accepted were system failings as opposed to deliberate attempts to mislead customers. Whilst credit was given for that, Signet/H Samuel was nevertheless fined £60,000 in respect of the sale of rings which had otherwise resulted in a gain to the company of around £6,500, and was ordered to pay the council’s costs of £13,382. A representative from the prosecuting team said that the H Samuel case represents a “clear warning” to retailers that trading standards officers will act in the interests of consumers and take action where traders fail to adhere to consumer protection legislation.

Consumer protection advice for retailers

Retailers must be very careful, when using reference pricing – either in online promotions or via any other marketing communications – not to mislead customers into thinking they are getting a good deal. Guidance on this, and related pricing issues, is available on the Advertising Standards Authority and Committee of Advertising Practice website and in the Chartered Trading Standards Institute’s April 2018 Guidance for Traders on Pricing Practices.

Retailers should also be aware that the stance adopted by the council in Torfaen is indicative of a wider drive, both within the UK and across the EU, to enforce national and cross-border laws to protect consumers. For example, on 22 February 2019 the European Commission called for online shopping websites to give customers clearer information about pricing and discounts after finding that some 60% of websites screened showed irregularities regarding compliance with consumer protection laws – particularly in relation to the advertisement of pricing promotions and the failure of traders to provide an easily accessible link to the Online Dispute Resolution platform. On 25 February 2019 the Chair of the UK’s Competition and Markets Authority (CMA) announced a package of preliminary proposals to strengthen the CMA’s consumer protection enforcement tools.

Walker Morris will monitor and report on any pertinent proposals and/or legislative developments, but in the meantime retailers should note that this new focus on compliance with consumer protection laws is likely to result in increased scrutiny, at a local, national and even international level, of their online and marketing practices.

For further advice or information, for assistance with the drafting or updating of appropriate policies and procedures, or to enquire about Walker Morris’ CPRs training for businesses, please contact Gwendoline Davies or any member of Walker Morris’ Retail Team.