December 3, 2012
– Eight supermarkets have agreed to a set of OFT principles to address concerns over special offers and promotions for food and drink.
Aldi, Co-Op, Lidl, Marks and Spencer, Morrisons, Sainsbury's, Tesco and Waitrose have agreed to adopt the principles into their own policies, following constructive engagement with the OFT.
The principles clarify the OFT's view on how promotional claims should be used so that consumers can rely on them being fair and meaningful regarding the value of the product or the existence of a discount.
They also identify activities that would be of concern to enforcers:
The OFT launched its investigation into the supermarket sector to consider concerns that shoppers could be confused by the way prices are displayed, advertised and promoted. The OFT has made no finding that the supermarkets have breached the law or were engaging in misleading promotional practices. However, it did find what appeared to be inconsistency in the way the law was being interpreted and applied. It developed these principles to establish a more consistent approach across the sector.
When using internal reference pricing, such as 'Was £3, Now £2' or 'Half Price', the principles say that prices should be presented as discounts for the same or less time than the product was initially sold at the higher price. And prices should not be artificially inflated to make a later 'discount' look more attractive.
The principles say that pre-printed value claims on packs, for example 'Bigger Pack, Better Value', must be true. Where such claims are made, there should not be a cheaper way of buying the same volume of the product elsewhere in the same store. This applies even when there is a promotion on smaller packs of the same item.
Clive Maxwell, OFT Chief Executive, said:
'Household budgets across the country are under pressure and shoppers should be able to trust that special offers and promotions really are bargains. Prices and promotions need to be fair and meaningful so shoppers can make the right decisions. Nowhere is this more important than during regular shopping for groceries, which accounts for 44 per cent of retail spending.
'Our principles taken together with previous guidance provide supermarkets with a clear benchmark for how they should be operating so that their food and drink promotions reflect the spirit as well as the letter of the law. We are pleased that supermarkets have engaged constructively throughout our investigation and we will keep a watching brief on promotional practices in this sector.'
The principles agreed by the eight supermarkets, and further details on this project, are available on the Retail food pricing and promotional practices case page.
The OFT's investigation involved mystery shopping exercises, a consumer survey, a round-table attended by consumer groups, industry associations and the supermarkets, and bilateral meetings with the supermarkets.
The investigation considered a variety of issues, including external reference pricing and bait-pricing. The principles relate to the specific forms of promotional activity that have emerged as priorities during the OFT's investigation.
The OFT set out its overarching position on promotion in its Advertising of prices study in 2010. The principles for the supermarket sector relate to the specific forms of promotional activity that have emerged as priorities during the OFT's investigation.
The OFT is working with local authority Trading Standards Services and others, including the Trading Standards Institute (TSI), to ensure that published business guidance (including the BIS Pricing Practices Guide) is up to date and achieving its purpose.
'UK food and grocery retailers 2011' Verdict (September 2011) reported that food and grocery spend is approximately £130bn, representing 44 per cent of total retail spend.
The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) prohibit traders from engaging in unfair commercial practices, including those which are likely to distort the behaviour of the average consumer.
The Advertising Standards Authority (ASA) regulates the content of advertisements, sales promotions and direct marketing in the UK and ensures that standards are kept high by applying the Committee of Advertising Practice (CAP) and Broadcast Committee of Advertising Practice (BCAP) advertising standards codes. The OFT supports the ASA by acting as a statutory regulatory partner, with the ability to take enforcement action if necessary.