Last month TM Lewin & Sons received a slap from the Advertising Standards Authority for misleading advertising. TM Lewin has been required to remove the misleading advertising. Going forward it has promised to make clear the basis of price comparisons where the discounted price was available for longer than the higher price.
So what exactly did TM Lewin, like some other brands, try to do?
On the TM Lewin website page in which it promoted suits and shirts, some of the products were listed with an original and reduced price and were labelled “New”. But had the pieces ever been available at the original prices?
Although some of the suits and shirts advertised on the website had been available at the higher price for 28 days before being discounted, the products did not show the dates during which the products were available at the higher advertised price. Nor could TM Lewin demonstrate that all of the suits and shirts on the website had been available at the higher advertised price for at that time.
TM Lewin also claimed that they price-established the ranges of their suits and shirts, and not each product individually, and that they typically price-established a minimum of 10% of each range. However, the ASA held that this advertising was misleading and ruled against TM Lewin.
This tactic is often referred to as price referencing and is used in a number of industries to encourage sales.
The concept of reference pricing concerns offers by retailers to highlight to consumers that current prices of products are good value by including a reference to a higher past or future price.
It can at times come under the scrutiny of the Office of Fair Trading.
How can you avoid following suit?
Pricing Practices Guide, published by the Department of Business, Innovation and Skills, provides guidance on good practice when using reference pricing. The Guide recommends that a retailer should generally use, as the basis for comparison, the most recent previous price for the product, which should have been available for at least 28 consecutive days and last offered to consumers no more than six months earlier. In respect of TM Lewin the ASA acknowledged that this need not always be the case and that if a price comparison used in an advertisement differed from this advice, the basis of the comparison should be made clear. For example, by clearly stating the actual dates during which the products were available at the previous price. TM Lewin had not done this and has therefore felt the wrath of the ASA.
Although a retailer may be tempted to advertise false reference prices in order to survive alongside competitors, reference pricing in this way can be harmful to consumers as the seemingly low prices put pressure on the consumer to buy the product immediately, rather than looking around the market for the best available deals. The non-legal consequence of misleading advertising, such as the adverse publicity of the retailer should be enough to deter brands from this bad practice.