Dubious sales and advertising practices used by online retailers are to be investigated by the Office of Fair Trading (OFT) to stamp out misleading tactics.
The watchdog is splitting its investigation into two separate studies. The first, which will be completed by spring 2010, will focus on companies that tailor their prices using information collected about a customer’s internet use.
For example, this might involve collecting an individual's web-browsing behaviour in order to select appropriate advertisements to display.
The second, more in-depth study will investigate potentially misleading sales tactics. These include:
* Drip pricing: where the price slowly increases through during the buying process.
* Baiting sales: customers are lured by the promise of discounts but ultimately end up paying the fully priced product because only some products’ pricetags are reduced.
* Reference prices: where retailers use a relatively high reference price compared to sale price. For example 'was £50, now £20', or '50% off'.
* Time-limited offers: where sites offer pricing discounts for a limited time.
* Complex pricing: offers – such as three-for-two – make it hard for consumers to assess an individual price.
The OFT will also extend its study to include price comparison websites, which may use some of these potentially misleading techniques. The watchdog hopes to complete its study by summer 2010.
“These studies will ensure that we keep up to date with the latest developments and, in particular, on how new pricing and advertising practices are emerging and evolving online,” says Heather Clayton, senior director at the OFT.
“It is very important that the OFT's approach to potentially misleading practices remains well-informed by a sound evidence base, so we effectively protect consumers while allowing firms to compete freely.”
Although the OFT has not given much indication whether it thinks misleading practices are rife in the online section, it has not ruled out potentially taking enforcement action against firms if they are found to have breached consumer law.
One practice causing concern is the promotion of of discount vouchers that don't have an immediately obvious expiry date.
'Retailers issue a discount without an end date so when web savvy shoppers click through to get the deal they find it has expired," says Mark Pearon, founder of discount code myvouchercodes.co.uk. "Consumers often don’t get the bargain they wanted, and quite often don't get the lowest price as they do no further shopping around."