OFT threatens fines for 'misleading' pricing

Budget airlines and other sectors may need to watch their step after the Office of Fair Trading (OFT) issued new guidelines about misleading consumers with confusing pricing.

The new OFT guidelines concluded that companies using pricing models likely to mislead consumers should be liable to ‘court action and fines’.

Published today, the guidance follows a year-long investigation into how the OFT should implement the 2008 Consumer Protection From Unfair Trading Regulations Act. 

Today's report was particularly damning of the practice of ‘drip pricing’, where credit card surcharges and other hidden compulsory costs are not included in advertised prices, creating a misleadingly low impression of the price.

No sector or brand was mentioned specifically by the OFT, but budget airlines often use a 'drip pricing' model, where compulsory charges such as credit card fees are not included in advertised costs.

John Fingleton, OFT chief executive, said: "Pricing practices, used in a transparent and fair manner, can provide consumers with a helpful shortcut to assess whether a particular offer is a good or bad deal. However, our research has highlighted how certain pricing tactics can be used in a misleading way.

"Misleading pricing is not only bad for the consumer, it is also bad for competition, and creates an uneven playing field between fair dealing businesses that stick to the spirit of the law, and those that push the boundaries too far.

"We urge all firms to review their pricing practices and to get their houses in order where necessary."

Troublesome pricing strategies were ranked, the most likely to mislead first:

  1. Drip pricing (where optional price increments such as taxes, card charges and delivery charges are added during the buying process)
  2. Time-limited offers (for example 'offer must end today') 
  3. Bait pricing (when consumers are drawn in with offers of discounts although few items are available at the discount price) or complex pricing (where the price depends on numerous elements which may be conditional on each other) 
  4. Reference pricing (such as ‘was £100, now £60’) 
  5. Volume offers, that could be multiple unit price promotions (such as ‘three for two’) or 'Free' products offered as part of a package (such as ‘first two months free’)

BA last month launched an ad campaign specifically targeting budget competitors EasyJet and Ryanair. The campaign focused on what BA included in its advertised price, and gave the relative costs of equivalent flights of all three airlines on its website.

Other sectors that might come under the OFT's scrutiny include supermarkets running FMCG or food promotions, broadband suppliers offering subscription discounts and furniture retailers that frequently use sale 'must end' advertising.

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer