Retail discounting: a commercial tactic or a regulatory risk?

This article was first published by Business Reporter and is reproduced here with permission.

The ASA has ruled that one of Sports Direct’s ads was unlawful. But was it? Nathan Peacey and Tamzin Robson at Foot Anstey explain the complicated rules around advertising product pricing and describe the pitfalls causing problems for many retailers.

Few things are as familiar in retail as the crossed-out price. “Was £100, now £50”, “50% off” or a significant saving against a marked-down RRP are powerful messages because they give consumers an immediate reason to buy.

This matters particularly in the current retail environment. Consumer confidence remains fragile, discretionary spending is under pressure, and retailers continue to face a rising cost base.

Promotions and price-led marketing are for many retailers an important means of driving demand. However, they are also making retailers a target for increased regulatory scrutiny from the Advertising Standards Authority (ASA) and the Competition and Markets Authority (CMA), which point out the potential for consumers to be given an exaggerated impression of the saving on offer.

For retailers, that makes the question of what constitutes a “genuine” saving by reference to a previous higher price considerably more important.

Reference pricing: where is the line?

Reference pricing is not inherently problematic. Retailers can legitimately compare a current price with a previous selling price or, where one exists, an RRP to demonstrate value. The difficulty is establishing that the saving presented to consumers is genuine. The fact that a higher price existed does not, by itself, make the comparison legitimate.

The ASA will consider the overall impression given to consumers and whether the retailer can demonstrate that the saving is real. Relevant factors can include where and for how long the higher price was offered, the prices and volumes of actual sales, and how recently the reference price applied. When investigating an advert, the ASA values evidence that significant sales were made at the higher price and that the period the product has been on sale is not markedly longer than the higher price period. For RRPs, a particularly important issue is whether the quoted RRP reflects the price at which the product is generally sold across the market.

That was the issue in the ASA’s recent ruling against Frasers Group Trading Ltd, trading as Sports Direct. Sports Direct advertised a Puma top “from £17.00” against a struck-through £45 RRP, alongside an “UP TO 50% OFF” claim. Despite evidence that Puma’s RRP was £45 and that the product had previously been sold at that price, the ASA concluded that the evidence did not demonstrate that £45 was the price at which the product was generally sold across the market.

There are mechanisms for challenging ASA decisions, which Sports Direct has indicated it intends to use. A party to a final ASA Council ruling can seek an Independent Review where, for example, there is said to be a substantial flaw in the ruling or the process by which it was reached.

What makes that challenge particularly interesting is that the wider legal approach to reference pricing is still developing. In July 2026, the High Court rejected the CMA’s attempt in the Emma Sleep litigation to impose a fixed sales-volume ratio for determining whether “was/now” pricing was misleading. While the case concerned a different form of reference pricing, the judgment reinforces the importance of looking at the overall impression on the average consumer rather than applying a single prescriptive test.

For retailers, that lack of prescription creates uncertainty. Businesses using reference pricing will need to be confident that they can substantiate the savings they advertise, particularly as the CMA’s involvement brings the prospect of financial penalties as well as reputational risk.

New CMA enforcement powers

An adverse ASA ruling can result in advertising being withdrawn or amended and have a reputational impact. What the ASA cannot itself do is impose the substantial financial penalties now available to the CMA. For some retailers, the commercial advantage of aggressive pricing outweighed the risk of reputational harm of an adverse ASA ruling. It is rare for under-resourced Trading Standards teams to take criminal enforcement action over misleading ads. 

Since April 2025, the CMA has had strengthened consumer enforcement powers under the Digital Markets, Competition and Consumers Act 2024. It can determine certain breaches of consumer law directly, without first establishing the infringement in court, and impose penalties of up to 10% of worldwide turnover or £300,000, whichever is higher.

Those powers are already being used. The CMA have already issued several penalties, including a £4.2m penalty against the AA in relation to drip pricing.

Reference pricing has not yet been the subject of those headline direct-enforcement penalties, but the combination of the CMA’s interest in online pricing practices and its new enforcement toolkit materially changes the risk profile. Businesses will need to watch closely as to how the CMA approaches reference pricing under its strengthened enforcement regime.

What should retailers do now

Pricing practices now warrant senior management attention. With the regulatory consequences becoming more significant, boards and senior management need confidence that the business can substantiate the savings it puts in front of consumers. That means understanding how reference prices are set, whether appropriate processes are in place to evidence them, and who is responsible for reviewing and challenging promotional pricing. Appropriate systems and controls should support that approach consistently across the business.

Compelling discounts remain commercially important for many retailers, but as regulatory scrutiny increases, so too does the commercial risk of a saving that cannot be defended as genuine.