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.

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