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By | OUT-LAW.COM 20th August 2009 09:21

OFT to probe online advertising, pricing tactics

Which is the best price comparison site, anyway?

Consumer protection watchdog the Office of Fair Trading (OFT) will investigate online pricing tactics and internet advertising techniques that mislead consumers, it has said. It will also probe price comparison sites and behavioural advertising.

The OFT, which polices the behaviour of businesses on behalf of consumers, may propose an industry code of practice on advertising and pricing if it finds enough evidence of unfair behaviour by online retailers.

It has asked the public and businesses for initial input on what it should investigate before formally beginning the process this autumn.

"The study will look at the current consumer law surrounding advertising and pricing," said an OFT statement. "It will evaluate which advertising and pricing practices are most detrimental to consumers, taking into account the growth of the use of the internet for online shopping, information provision and advertising."

The OFT said that there are pricing tactics that are prevalent online that it will examine.

"At this stage we are minded to include several pricing practices which may lead to consumer detriment such as: 'Drip' pricing tactics, where consumers only see an element of price upfront but price increments 'drip' through during the buying process; 'Baiting' sales which entice consumers with promises of discounts but then have very few items on offer at the sale price; Reference prices, that is, price promotions which create a relatively high reference price compared to sale price; [and] Time limited offers such as sales which finish at the end of the month or special prices which are available for one day only," it said.

"We also intend to look specifically at price comparison sites which may be complicated by the use of these practices," said the OFT.

As well as pricing, the investigation will look at advertising. Behavioural advertising has been controversial because of the potential to erode privacy of using personal information to better target ads to consumers.

"We are also considering including the use of personal information in advertising and pricing. In particular, we may look at behavioural advertising where information on a consumer's online activity is used to target the internet advertising they see. We may also examine the practice of tailoring prices to individual consumers on the basis of their personal data," said the OFT.

"Finally, we are minded to look at the use of opt-in or opt-out boxes for example, for annual renewals, add-on charges or agreements to pass on personal details to third parties," it said.

Heather Clayton, senior director of the OFT's Consumer Market Group said: "The way that businesses advertise and price goods and services constantly evolves, and we need to keep up to date on how consumers view these adverts, and the types of advertising and prices which may mislead."

"Before starting our study, we want to understand from consumer groups, businesses and other organisations which areas they think we should focus on," she said.

The OFT said that one of the outcomes of the study might be the creation of an industry code of practice on the issues covered in it. It also might take enforcement action against retailers it believes are treating consumers unfairly.

The study is being conducted under the OFT's powers to assess competition and consumer issues in markets granted to it by section five of the Enterprise Act.

The OFT recently took action against Ryanair, which agreed to change the way it advertised and sold tickets. After being referred by the Advertising Standards Authority (ASA), Ryanair promised to be clearer about add-on charges and its claims about price.

See: Details of the investigation

Copyright © 2009, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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