On 14 January, the ASA published updated guidance on promotional savings / discount claims.
It's an area where there is a lot of common ground between the ASA (Advertising Standards Authority) and CMA (Competition and Markets Authority), but there are some important differences in approach when it comes to online discounts/savings claims - in particular "was/now" pricing, or as they are sometimes called "reference prices".
WAS pretty reasonable and clear / NOW it's not!
This area has been pretty well settled and uncontroversial for several years, that is until the CMA decided to move the goal posts in a way that has taken online retailers by surprise.
In its recent case against online mattress retailers, the CMA invented a brand new requirement when it comes to was/now discount claims. It's a requirement that doesn't apply in the same way in any other country and hasn't applied here in the UK before. It doesn't come from the legislation. Instead, the CMA seems to have made it up. We have written about it before, and I have to say I have a bee in my bonnet about it.
In a nutshell, when making a "WAS £X, NOW £Y" type discount claim in relation to a particular product, the retailer (or someone!) had to sell the product for a reasonable amount of time at that full price in order for the price to be properly established, i.e. for it to be considered a genuine usual selling price. This is fair enough - the rule applied by the ASA was that a product should generally be available at the higher price for at least as long as it is discounted, in order for the higher price to count as the genuine usual selling price. So, if it's sold at the full price (£100) for 3 months, it can be sold at the discounted price (£50) while highlighting the discount ("WAS £100, NOW £50"), for up to 3 months. This is known as the 'duration requirement'.
There were some other basic requirements too. It had to be sold in roughly the same circumstances as it is later made available at a discount - so you couldn't just offer it up for sale on a shelf in one small outlet in the Outer Hebrides at £100, then sell it online and in all your UK stores for £50, while claiming "WAS £100, NOW £50".
Even if you satisfy those requirements, you would have to show that a 'significant number' were sold at the full price. If none were sold, then it's hard to argue the higher price was the genuine usual selling price of the product. Fair enough. It wasn't entirely clear what 'significant number' meant, but a common sense approach was applied. Nobody died. So far, so good.
But then, in August 2024, the CMA threw a cat among the pigeons.
The CMA announced it had investigated some online mattress companies that were selling mountains of mattresses at, what they claimed, was a discount. The problem was they were selling thousands at the discounted price, but had only sold a handful (a tiny %) at the full price. The CMA decided this was misleading - and they might have a point. BUT the CMA went further, for reasons that aren't immediately clear to... well, anyone.
They reiterated the 'duration requirement' applied, nothing new or controversial there. BUT the CMA decided to take a brand new approach to the requirement that a 'significant number' of items had to be sold at the full price.
Instead of a 'significant number', the CMA said the retailer had to show they had sold a 'significant proportion' of items at the full price, and that proportion had to be BIG. The CMA invented a new ratio, which it calls the 1:2 ratio. It said that for every product sold at the full price, you could sell just two at the discounted price. So, if you sell 10 items at the full price, you can only sell another 20 in a sale while using a 'was/now' price claim. What worried commentators, advisers and others is that the CMA didn't seem to limit this to the online mattress sectors, and has dropped strong hints it intends to apply this rule more broadly to most sectors.
This is very... "significant". No other regulator in any other country in the world applies this kind of strict ratio to our knowledge - not even EU markets. It isn't clear how the CMA came up with this ratio, and it seems unlikely to be based on evidence of the average consumer's reasonable expectations. Nobody seems to have asked for it, and nobody seems to want it - but the CMA is sticking to its guns.
It has all the hallmarks of a solution looking for a problem...
And to come up with this at a time when the government (and specifically the Chancellor of the Exchequer) is calling on UK regulators to put growth ahead of unnecessary, stifling regulation, this seems... challenging!
Turn up the 'volume'
For now, the CMA's guidance is limited to the online mattress sector, and one of those companies under investigation (Emma) is resisting the CMA's demands to promise they will abide by this 1:2 ratio, so in time, a court is expected to rule on whether the CMA's approach will stick. If the court doesn't stand in its way, and if Rachel Reeves doesn't have a strong word with the CMA, the CMA is likely to roll out this requirement more widely. If it does that, it will make WAS/NOW claims very difficult to make in practice in the UK. The administrative burden of managing that information for each product on each label/website and updating it as soon as it becomes necessary due to the ratio being met, and pulling the item (and ads for it) out of sales events before they have run their course - universally, clients tell us it's just not realistic.
Retailers large and small are likely to shy away from WAS/NOW discount claims if they aren't prepared to take the risk of the CMA issuing one of its walloping fines, so they aren't likely to drop their prices in quite the same way at some points in the year, or shine a light on their great deals - which, one suspects, will not be conducive to economic growth...
ASA's latest guidance
Having had an opportunity over the past six months or more, the ASA has now published its updated guidance, and it does not appear to have 'gotten into bed' with the CMA on this point - that's a terrible mattress pun, sorry to spring that on you.
Back to the very serious point: Instead of following the CMA, the ASA has stuck with its references to 'significant number' and made no reference to the CMA's 1:2 ratio, except to back the CMA up (to some extent) when it comes to online mattress retailers, specifically.
The ASA has referenced the CMA guidance and online mattress case/guidance, but hasn't adopted the volume requirement. Instead, the ASA's guidance states that they will take account of sales data, as they always have, and that "The ASA may also consider the number of sales made at the reference price, and marketers should either be able to demonstrate that a significant number of sales were made at that price, or that the higher price was a realistic selling price." So, pretty laid back... even when it comes to mattresses.
Where does this leave retailers?
In a state of limbo. On the one hand, the ASA guidelines appear to stick to the tried and tested approach, which is far easier for retailers to achieve in practice, striking a balance with the needs of businesses while not misleading consumers. However, the CMA appears to be plowing ahead with its case against Emma, in the hope of getting the court to support its own, stricter approach.
In practice, the CMA is unlikely to try to enforce its will on retailers until that case has been heard (we hope!), but online retailers will need to keep an eye on those developments, and in the meantime, ensure they follow the ASA's latest guidance as a minimum. You can access that ASA guidance at the link below, or by clicking here.
Of course, we will be monitoring developments, too. And we are here to discuss any of these topics with retailers and businesses that have questions or concerns in the meantime.
We hope the CMA will take an evidence-based approach on this - based on real consumers' understanding and real-world expectations - and that the CMA pulls back from imposing this tough requirement on UK businesses (a requirement which is not reflected in the legislation itself), and heeds the Chancellor's call to support businesses and economic growth, while following the ASA's lead when it comes to protecting consumers. Dare I say it, the ASA has been fulfilling that role for decades, and this issue hasn't vexed them before now.
On the topic of evidence, if any retailers elect to gather intel on consumer expectation/understanding on this point, that would be fascinating to see!
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