Business

Supermarkets agree to end 'yo-yo pricing' with new code

  • 30 November 2012
  • From the section Business
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Eight supermarkets have agreed to ensure that special offers and price promotions are fair.

The Office of Fair Trading (OFT) has been investigating the way prices are displayed, advertised and promoted in stores.

It raised concerns about prices being artificially inflated to make later discounts look more attractive.

The major UK supermarkets have now agreed to adopt a set of principles drawn up by the OFT.

They are Tesco, Sainsbury's, Morrisons, Waitrose, Marks and Spencer, Aldi, the Co-op and Lidl.

Asda, which has not yet signed up, said it was considering the revised code.

It objects to one of the principles, which states that any discount period must not be longer than the normal-price period, arguing that this could actually increase incidents of "yo-yo" pricing.

"We don't think this is in the best interests of our customers", a spokesperson told the BBC.

Clive Maxwell, OFT chief executive, told the BBC: "It is particularly welcome that we've reached this agreement at this stage with household budgets under pressure".

But James Foord from price comparison service mysupermarket.co.uk said: "I'm highly sceptical that this will make any difference while these principles remain voluntary.

"A lot of our customers remain sceptical, too."

'Squeezed finances'

The OFT says that "half price" or "was £3, now £2" offers must be sold at the new discounted price for the same, or less, time than the previously higher price.

This would prevent short-term, artificially inflated prices masking the offer.

Items that suggest they are "better value" because they are in a "bigger pack" must have a comparable product elsewhere in the same store,

"Shoppers should be able to trust that special offers and promotions really are bargains," said Mr Maxwell.

"Prices and promotions need to be fair and meaningful so shoppers can make the right decisions. Nowhere is this more important than during regular shopping for groceries.

"[This] provides supermarkets with a clear benchmark for how they should be operating so that their food and drink promotions reflect the spirit as well as the letter of the law."

Richard Lloyd, executive director of consumer group Which?, said: "When household budgets are squeezed and food prices are one of people's top financial worries, it's unacceptable that shoppers are confused into thinking that they're getting a good deal when that might not be the case.

"Regulators should be prepared to take enforcement action against traders found breaking the rules."

A Which? investigation in May suggested that some customers had been misled by supermarkets over discounts and multi-buy offers.

It analysed more than 700,000 prices and suggested that in some cases "discounts" ran for much longer than the original price. Following that investigation, some supermarkets admitted isolated errors amid a huge volume of pricing.

'Inconsistency'

Misleading advertising is illegal under the 2008 unfair trading regulations, and the OFT is not making any recommendation that the law should be changed.

The regulator said it did not discover any illegality during its investigation, but did find some "inconsistency" in the way the law was interpreted and applied.

Meanwhile, nearly 40% of fast-moving consumer goods could be on some sort of promotion or discount.

Many of the supermarkets said they were happy to work with the OFT.

"We will continue to ensure that our pricing and promotions are as clear as possible for our customers," said a spokesman for Sainsbury's.

The Co-op said: "We understand how important it is for shoppers to be able to easily understand what the promotional offer is, so they can spot the best deal, and we are committed to providing clear and accurate labelling for our customers so they can make informed purchasing decisions."

Aldi said it supported any initiative that encouraged "transparent pricing and a fair deal for consumers", although the agreement would have no effect on its own prices.

A Marks and Spencer spokesman said: "It is right that we sign up to these new guidelines."

A Morrisons spokesman said: "We are happy to sign up to the OFT's principles because they reflect good promotional practice."

Tesco said it welcomed the OFT's "clarity" and that it supported the regulator's wish to see a consistent approach to promotions across the supermarket sector. Waitrose said it was also supportive and always ensured pricing was clear and transparent.

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