The OFT is to conduct a market study looking at the impact on consumers from potentially misleading advertising and pricing of goods and services, and is asking interested individuals, businesses and other organisations for their views on the scope of the study.
The study will look at the application of consumer law to advertising and pricing, with a particular focus on the internet. It will evaluate which online and offline pricing and advertising practices have potential to be most detrimental to consumers, and may also look at the use of personal information in advertising and pricing – in particular, where information from a consumer’s online activity is used to target the internet advertising he or she receives.
Heather Clayton, Senior Director of the OFT’s Consumer Market Group, said:
‘The way that businesses advertise and price goods and services constantly evolves, and we need to keep up to date on how consumers view these adverts, and the types of advertising and prices which may mislead. Before starting our study, we want to understand from consumer groups, businesses and other organisations which areas they think we should focus on.’
The market study is expected to commence in the autumn, and the OFT will be contacting some key parties directly. Other interested parties can submit their written views to advertisingandpricing@oft.gsi.gov.uk by 18 September 2009.
The intial plans of the OFT are to include several pricing practices which may lead to consumer detriment such as:
- ‘Drip’ pricing tactics, where consumers only see an element of price upfront but price increments ‘drip’ through during the buying process.
- ‘Baiting’ sales which entice consumers with promises of discounts but then have very few items on offer at the sale price.
- Reference prices, that is, price promotions which create a relatively high reference price compared to sale price, such as ‘was £50, now £20’, half price, 50% off, or £20 compared to a recommended retail price of £50.
- Time limited offers such as sales which finish at the end of the month or special prices which are available for one day only.
- Complex pricing where it is difficult for consumers to assess unit price, for example three for two or ‘non-inclusive’ prices where lots of separate (often necessary) components are needed to generate a final price.
The OFT also intends to look specifically at price comparison sites which may be complicated by the use of these practices. They also mention specifically the use of personal information in advertising and pricing. In particular, we may look at behavioural advertising where information on a consumer’s online activity is used to target the internet advertising they see. We may also examine the practice of tailoring prices to individual consumers on the basis of their personal data.
The use of opt-in or opt-out boxes is also likely to be considered.
For each of these topics, noting any differences between the online and offline world, the OFT will consider:
- Trends in the prevalence, and likely development, of the practice.
- The potential benefits and harm to consumers arising from the practice.
- Existing regulation which may apply to the practice.
- The types and effects of possible interventions.
The OFT may focus on one or more key industries, such as furniture, travel, electrical goods or entertainment. The following will probably not be considered:
· broadcast advertisements (which are regulated by Ofcom)
· issues relating to misleading advertising of quality
· terms and conditions or other issues which do not relate to either advertising or pricing.
