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OFT to investigate online pricing and advertising

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The Office of Fair Trading (OFT) is to conduct a market study looking at the impact on consumers of potentially misleading advertising and pricing of goods and services, and is asking interested individuals, businesses and other organisations for their views on the scope of the study.

The Advertising and Pricing market study will look at the application of consumer law to advertising and pricing, with a particular focus on the internet. It will evaluate which online and offline pricing and advertising practices have potential to be most detrimental to consumers, and may also look at the use of personal information in advertising and pricing — in particular, where information from a consumer’s online activity is used to target the internet advertising he or she receives.

In particular, the OFT is planning to look at:

  • ‘Drip’ pricing tactics, where consumers only see an element of price upfront but price increments ‘drip’ through during the buying process.

  • ‘Baiting’ sales which entice consumers with promises of discounts but then have very few items on offer at the sale price.

  • Reference prices, that is, price promotions which create a relatively high reference price compared to sale price, such as ‘was £50, now £20’, half price, 50% off, or £20 compared to a recommended retail price of £50.

  • 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 unit price, for example three for two or ‘non-inclusive’ prices where lots of separate (often necessary) components are needed to generate a final price.

“We also intend to look specifically at price comparison sites which may be complicated by the use of these practices,” says the OFT. “Finally, we are minded to look at the use of opt-in or opt-out boxes for example, for annual renewals, add-on charges or agreements to pass on personal details to third parties.”

“The way that businesses advertise and price goods and services constantly evolves, and we need to keep up to date on how consumers view these adverts, and the types of advertising and prices which may mislead,” says Heather Clayton, senior director of the OFT’s Consumer Market Group. “Before starting our study, we want to understand from consumer groups, businesses and other organisations which areas they think we should focus on.”

Work on the market study is expected to commence in the autumn and the OFT will be contacting some key parties directly. Other interested parties should submit their written views to by 18 September 2009.

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