The OFT launched two separate market studies into advertising and pricing on 15 October.
Following consultation on its plan to study advertising and pricing practices, the OFT has decided to split the work into separate, tightly-defined studies focused on two distinct issues.
The first, into online targeting of advertising and prices will cover behavioural advertising and customised pricing, where prices are individually tailored using information collected about a consumer’s internet use. It is expected that this study will be completed by Spring 2010.
The second, into advertising of prices, will consider various pricing practices which may potentially mislead consumers. The study will look in particular, but not exclusively, at how these practices are used online. It will examine practices including:
• drip’ pricing, where price increments ‘drip’ through during the buying process
• ‘baiting sales’, where only some products are available at the discount price and consumers may ultimately purchase a full priced product
• ‘reference prices’, where there is a relatively high reference price compared to sale price, for example ‘was £50, now £20’, or ‘50% off’
• 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 an individual price, for example ‘three-for-two’ or ‘non-inclusive’ prices, and
• price comparison sites which may use some of the practices described above.
It is expected that this study will be completed by Summer 2010.
Heather Clayton, OFT Senior Director, said:
‘These studies will ensure that we keep up to date with the latest developments and, in particular, on how new pricing and advertising practices are emerging and evolving online. It is very important that the OFT’s approach to potentially misleading practices remains well-informed by a sound evidence base, so we effectively protect consumers while allowing firms to compete freely.’
The OFT started consulting on the proposed advertising and pricing market study in August 2009 (see http://www.scl.org/site.aspx?i=ne12772).
Possible outcomes as a result of these studies may 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 or to sector regulators
• investigation and enforcement action against companies suspected of breaching consumer law
• a market investigation reference to the Competition Commission.
Market studies are conducted under the OFT’s general function under section 5 of the Enterprise Act 2002, which includes the functions of obtaining information and conducting research.
