Risks in retail: Our takeaway from ASA’s recent ruling

Advertising Standards Authority ruling highlights a risk for retailers

We understand that present trading conditions are tough for retailers and businesses.

In the face of such challenges, businesses will want to ensure their commercial strategy is robust and puts their business in the strongest position moving forward.

The specific risks associated with Covid 19, supply chain and 'Brexit' are all too familiar.

However, a recent ruling by the Advertising Standards Authority ("ASA") highlights another risk to business: regulatory intervention – and fallout from this in the form of adverse reputational impact.

The case

The ASA received complaints about a TV advert run by Dormeo UK Limited ("Dormeo").  This meant Dormeo needed to comply with the UK Code of Broadcast Advertising, or "BCAP".  The nub of the complaints being that whereas Dormeo was advertising a discount in the price of one of its products, the product in question was seemingly often on sale at a discounted price: so they complained they had been misled into thinking they were getting a bargain.

The complainants could have complained to their local Trading Standards department on the basis they (as the notional average consumer" had been misled, thus there had been a breach of the Consumer Protection from Unfair Trading Regulations 2008. They may yet be in the process of doing so.

The ASA considered Chartered Trading Standards Institute guidance, highlighting relevant factors when assessing whether a pricing promotion might be misleading and therefore in breach of the Consumer Protection from Unfair Trading Regulations 2008 and / or the BCAP Code. 

The key points of the ruling were:

• The promotion on mattresses broadly ran one month on and one month off – during a 365-day period it was on sale 50.14% of the time.
• Sales of mattresses during promotions in a six-month period were 7,833 at the discounted price, 196 at full price.
• This led the ASA to the conclusion that "full price" was not the usual selling price.
• Therefore, the advert was misleading because it was not a genuine saving;
• The advert must not appear again.
• In future Dormeo would need to be able to prove savings against usual selling prices. 

Foot Anstey's retail lawyers work closely with businesses in the UK and overseas advising and inputting to their commercial strategy to take account of the relevant risks in the marketplace, including in connection with ASA rules and regulations.

Tim Williamson, Managing Associate, commented:

"In our experience businesses will have to balance risks of underperformance that may follow from a strategy that does not help the business and the risks associated with regulatory intervention.  In this ruling, whereas consideration is typically given to the length of time during which products are offered for sale at the full price, the ASA here paid close attention to the number of sales made at the higher price to determine whether or not the higher price was the usual selling price. This will need to form part of any commercial strategy."