2nd April 2020

Excessive product pricing and misleading claims

The outbreak of COVID-19 has led to huge consumer demand for certain product types. Whilst this may be good news for some retailers, care should also be taken to ensure that rules are adhered to, especially around pricing and claims about the effectiveness of certain products.

What the law says

Consumers benefit from a number of protections to ensure fair treatment by retailers including protection against unfair contract terms and the prohibition of misleading and aggressive sales practices.

Excessive price increases in the current situation may well be deemed unfair and/or aggressive and lead to enforcement action. Similarly, traders must not mislead consumers by failing to provide information about how prices are calculated and must be especially mindful not to make inaccurate claims about product performance, especially when it comes to the effect of products on health and wellbeing.

COVID-19 taskforce

To tackle the heightened risk to consumers during the COVID-19 outbreak, the Competition and Markets Authority has launched a dedicated COVID-19 taskforce to ensure that retailers behave responsibly. Those who fail to do so could well face intervention and enforcement action. The taskforce will continue to monitor market developments and take action where it decides that businesses are exploiting the current situation.
It has also outlined a number of measures at its disposal including the ability to:

• Warn firms suspected of exploiting the circumstances (and vulnerable people) through unjustifiable prices or misleading claims.
• Advise government on emergency legislation.
• Advise on further policy measures to ensure markets function as well as possible in the coming months.

The rules around profiteering are clearly on the Government agenda with the Prime Minister suggesting that powers could be extended where required over the coming period.

What retailers should do

Of course, for the vast majority of businesses such practices will not be an issue though it is open to anyone with concerns to report such matters directly to the CMA. Businesses, should however, be mindful of the issues and ensure that they do not inadvertently fall foul of the rules, for example by putting too much reliance on product information from suppliers. Sensible steps to take include:

• Taking particular care to make sure that product information is factual and accurate, especially online.
• Only relying on product information from reputable sources and making sure that advertising and other marketing literature is in line with fact.
• Ensuring pricing remains reasonable and proportionate for product type, especially bearing in mind those types of goods which are in high demand.
• Providing full and clear pricing and cost (such as delivery cost) information.
• Making sure your online trading terms cover all relevant issues to help protect your business but also ensuring they are fair and reasonable and don’t include any terms which would breach the consumer protection and distance sales rules.
• Bearing in mind that not only will these measures help ensure compliance and help avoid any enforcement action, they will also help avoid reputational damage in the longer term.
• Keeping informed of legislative and policy developments, bearing in mind that new rules can be introduced quickly in the current situation.

We understand that retailers and many other businesses will have concerns. Our team are in place to help you, providing the right advice at the right time – every step of the way. Get in touch.

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