Online pricing and unfair practices

Gwendoline Davies is a partner in the Retail Group at law firm Walker Morris

In a recently publicised case, Signet Trading Ltd, the owner of high street jeweller H Samuel, was fined for providing misleading pricing information online, writes Gwendoline Davies. The case drew attention to what retailers can and can’t do when it comes to posting prices.

The law

The Consumer Protection Regulations (CPRs) were introduced in 2008 to implement the Unfair Commercial Practices Directive into UK legislation and prohibit businesses from engaging in unfair commercial practices in their dealings with consumers.

The regulations include, for example, giving false or misleading information; failing to give material information; exerting undue pressure on consumers; or engaging in any of the 31 specific banned practices listed in Schedule 1 to the CPRs.

Crucially, consumers are not only those people who actually buy from or pay a business – they also include anyone who is a prospective customer.

In detail, 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 buying 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) and causes, or is likely, to cause the consumer to make a different buying decision.

For the purposes of the law, information might be misleading because it contains false information, because it is deceptive or likely to deceive a consumer even if, strictly, it is factually correct. This includes 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 the retailer is bound by any code of conduct but is 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 decision. A common trap for the unwary is that liability for misleading by omission cannot be avoided if the retailer does not know what it should know and has taken no reasonable steps to find 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’.

There is no defence if a retailer knowingly or recklessly allows its or its employees’ conduct to fall below honest and professionally diligent standards.

Practical steps

If trouble does arise, there are tools that can be deployed in defence:

Initially, consider if the complaint is 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, look to see if 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.

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.

If none of these steps work, then consider whether a due diligence defence can be raised.

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