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Burberry's outlet store problem
Burberry is facing a class action claim from aggrieved American consumers as a result of the sale of Burberry pieces in outlet stores in the US.
At the heart of the litigation in the US is the sale of pieces made specifically for outlet centres being pieces marked “manufacturer’s suggested retail prices” but showing a “discount”.
Put simply – does the phrase “suggested retail price” imply that it was intended that the piece in question was made to be sold through a full price retail unit? If the answer is “yes” then it is possible to see how the US plaintiffs can claim that the price marking is “illusionary and deceptive”. But if the answer is, for example, that the “suggested retail price” was the price suggested for sale through an outlet, the plaintiffs could face difficulty in pursuing their action.
By all accounts Burberry is not the first brand to face this issue. The Times reported on 13 February that a US$ 4.88m payment had been made last year by Michael Kors which had also agreed to change its sale practices so as to settle another claim.
So could a similar claim be made in the UK? The starting point is that US style class actions are limited in the UK to competition law infringement. But putting that to one side, the sale in outlets of pieces made exclusively for the outlet does occur in the UK. As such if a brand was to make similar claims in the UK it could face action under the Consumer Protection from Unfair Trading Regulations 2008 (as amended).
The Regulations prohibit misleading actions by traders, and it is a false or misleading practice to provide false information or present an overall impression that deceives (or is likely to deceive) the average consumer, even if the information is factually correct, about (amongst other things):
- the existence or nature of the product; and
- the price (including how it is calculated).
This false or deceptive information must also cause or be likely to cause the average consumer to make a purchase he would not have made otherwise.
The sale of products made only for outlet stores will be a misleading practice if consumers are given the impression that the product was ever offered for purchase in the “normal” stores and/or that it was ever offered for purchase at a higher price.
Since 2014 consumers have also been able to pursue traders for civil redress for certain breaches of the Regulations. Breach of the Regulations’ prohibition on misleading actions is a criminal offence and a pricing issue could even result in a prosecution for fraud.
So take care when making claims about the pieces which you are selling, especially when it comes to prices.