On 15 October 2009 the Office of Fair Trading (OFT) announced
that it is undertaking two new market studies which are aimed at
clarifying and updating the understanding of consumer harm that
arises from potentially misleading advertising and pricing.
One of the main motivations for the study is the diversification
of advertising and pricing practices on the internet. The
legislation relating to these practices has also changed recently.
The Consumer Protection from Unfair Trading Regulations (CPRs) came
into force on 26 May 2008. The study will also consider how the law
applies to internet transactions
The studies will cover on the one hand online targeting of
advertising and prices and on the other hand, advertising of
prices. This announcement follows a consultation period which
commenced in August 2009 and canvassed the view of Government,
trade organisations, consumer groups and the advertising
The study into online targeting of advertising and prices will
behavioural advertising – which uses information
about an individual's web-browsing behaviour to select which
advertisements to display to that individual; and
customised pricing - where prices are individually tailored
using information collected about a consumer's internet use.
The OFT aims to complete this study by spring 2010.
The study into advertising of prices will cover various
potentially misleading pricing practices and particularly how they
are used online. These practices include:
'drip' pricing – where price increases
steadily build through the buying process;
'baiting sales' – using low prices to attract
consumers but having only some products available at the low
prices, so that many consumers end up paying full price;
'reference prices' – where discounts are
advertised by reference to how much the product cost previously and
whether that reference price is inflated;
time limited offers – such as one day price
complex pricing – where it is difficult for consumers
to assess the cost of an individual item e.g. three for two offers,
prices which don't include certain items;
price comparison websites which may use some of the practices
Several of these pricing practices are already specified as
being automatically unfair, and therefore unlawful, under the CPRs.
The OFT aims to complete this study by summer 2010.
Possible outcomes from a market study include:
giving the market a clean bill of health;
publishing information to help consumers;
encouraging firms to take voluntary action;
encouraging an industry code of practice;
making recommendations to Government;
referring the market to the Competition Commission for further
investigation and enforcement action against companies
suspected of breaching consumer law.
The study does not include broadcast advertising, which is
regulated by OFCOM.
These market studies are likely to involve the OFT requesting
data from various retailers about their pricing strategies. This is
part of the OFT's focus on consumer protection and is in
response to the growing importance of internet retailing and the
development of sophisticated advertising and consumer targeting
Online behavioural advertising has been the subject of public
controversy. Of particular concern has been the level of consumer
choice and potential privacy issues. The study will hopefully
provide some certainty to advertisers and consumers alike.
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