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Reference Pricing

As we're in the summer sales season, how does a consumer know that the Price is Right?

Research from YouGov indicates that 58% of global shoppers increased their expenditure for seasonal events in the past 12 months which means that now, more than ever, consumers are potentially vulnerable to trader’s pricing practices. It is, therefore, all the more important that traders understand their obligations so that consumer can be confident that they are, in fact, getting a good deal.

When advertising one price by reference to another, there is potential to mislead a consumer and breach of the Consumer Protection from Unfair Trading Regulations 2008. It is a criminal offence to make misleading statements about the price - including how it is set. The Regulations also contain a general prohibition on treating consumers unfairly. This is interpreted broadly to ensure maximum levels of consumer protection.

Sales promotions are used by traders and are seen as an important marketing tool, widely believed to have an impact on sales. However, given the nature of the consumer protection legislation and the regulatory framework in place, a retailer must ensure that any promotions avoid misleading consumers.

One common form of sales promotion is a “price comparison” with the trader’s own previous price, particularly in a seasonal sale event. There may be fewer evidential hurdles than are involved with comparing with a competitor’s price, but there are still many considerations in this method of promoting a “sale”.

The British Code of Advertising, Sales Promotion and Marketing (The CAP Code) require Sales Promotions to be legal, decent, honest, truthful. They should also be prepared with a sense of responsibility towards consumers and society. The rationale behind this is to encourage fair competition amongst retailers and to avoid misleading consumers about the price of an item and how it is calculated. The Code is applied in both spirit and letter.

There are many pitfalls for a retailer to avoid ensuring compliance with both legal and regulatory requirements. In general, however, the following advice may offer a useful guide for traders:

  • State all the previous prices as well as the new price and only make comparisons with prices offered recently
  • The retail price used as a basis of comparison must be genuine and include details showing the price was established
  • You are responsible to ensure that substantiating evidence can be provided to show that the product was usually sold at the higher price
  • Remember that promotions targeted at vulnerable consumer require special care and regardless of the consumer Good Faith is an important to consideration promote consumer confidence
  • The manner in which the promotion is presented can be equally important as the wording!

The CTSI Pricing Practices Guide provides the following important guidance[Guidance for Traders on Pricing Practices (]:

For each pricing promotion, you should ask yourself:

• is any information (however it is given) false?

• even if the information is factually correct, will it, or the way in which it is presented, deceive or be likely to deceive?

• is information that a consumer needs to know omitted, hidden, or given in a manner that is unclear, unintelligible, ambiguous or untimely?

If any of your answers are ‘Yes’, or if you have any doubts, you should change your pricing promotion.

The Ombudsman is launching a new consumer law course; building on the foundation of current training, this learning and development, aimed specifically at business leaders, offers relevant and practical insight into consumer protection law and how business should be geared to meet the needs of their consumers and their own colleagues. Pricing and Advertising compliance will be featured as a vital component this. To register your interest, please email


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