As we approach the final straight in the annual Christmas trading war, retailers under pressure to beat last year’s sales will be looking for something to give them an edge over their competitors.
One tried and tested way of doing this is to entice customers with eye-catching special offers and price reductions. But in this high pressure environment retailers need to be careful that they don’t inadvertently fall foul of consumer protection law, which prohibits misleading offers.
According to pricing rules established by the Department of Business, Innovation and Skills (BIS) the product must have been on sale at the full price for at least 28 days before it can be marked down. In addition, the product cannot have been sold at the discounted price for longer than the original, non-promotional price.
The risks in this area are particularly high with seasonal products. These have relatively short shelf lives and are often ranged in exclusively for the festive period. Examples might include novelty Rudolph knitwear, Christmas tree decorations or any other kind of festive-themed merchandise.
Retailers tempted to put this kind of product on special offer quickly to gain a price advantage over their rivals should think carefully. Has the product been on the shelves at the full price long enough to comply with the BIS rules?
Consider the following example:
A fashion retailer launches a special line of Christmas earrings and jewellery. The range went live on 16 October, so no discounts can be offered on any of the items until 14 November (ie the 28 day rule).
The entire range is then sold at a marked-down price with a “25% off” sticker from 14 November.
As the range was only sold at full price for 28 days, the 25% off promotion can only run for a maximum 28 days. The offer therefore cannot continue after 12 December.
By not planning ahead, the retailer has lost the ability to lawfully run the 25% price reduction offer in the crucial final two weeks before Christmas.
Of course retailers also need to plan ahead and think about the January sales. If certain products have been earmarked for the January sales now, make sure that they have been on sale at the full price for long enough to support the offers you intend to run.
It is important to remember that you have to combine all price markdowns when calculating how long the product must have been on sale at the full price. So if a product is sold at 25% off for two weeks, 50% off for four weeks and 75% off for two weeks, the product must have been sold at the genuine full retail price for a minimum eight weeks in total.
It is important to bear this in mind if you anticipate that a particular product or line is likely to be on sale for a long time, with multiple price markdowns.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com