Legal Updates

Commercial Law: Consumer Protection - Discounts - Misleading Advertising

Marketing is an important tool for attracting customers. It is commonplace to see banners announcing bargains of "70% off the retail price." However a recent High Court decision illustrates that care must be taken with such marketing.

In the case of Office of Fair Trading v Officers Club Ltd and another [2005], the defendant advertised products at 70% off the retail price. The relevant product was offered for sale in a limited number of stores at a higher price for a period of 28 days before being released to most of the stores at the discounted price.

The Office of Fair Trading issued proceedings claiming that such a strategy was misleading to consumers.

The defendant claimed that:

• there was no misleading advertising as the strategy had at all times complied with the guidelines enshrined in the Code of Practice for Traders on Price Indications issued by the Department for Trade and Industry; and
• it was legally impossible for them to be in contravention of the misleading advertising rules when they were complying with the code.

The court rejected these arguments and found that:

• the Code of Practice was designed to give retailers a degree of certainty while granting the regulatory authorities flexibility to curtail misleading practices despite strict adherence to the code;
• although the defendant had offered the products for sale at the higher price in accordance with the Code, he had not had a genuine belief that it could sell the products at those prices; and
• the adverts were misleading.

Sales and discount offers are an effective way of bringing in consumers and boosting revenue, however, businesses should be wary of using marketing strategies that may be misleading or in bad faith.

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© RT COOPERS, 2005. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.