Supermarkets warned over misleading pricing

100 back pocket money

Supermarkets are misleading and confusing customers with their pricing and promotional practises, an investigation by the Competition and Markets Authority (CMA) has found.

Following a "super complaint" from consumer group Which?, the CMA carried out a three month study into the pricing of 150,000 products.

The regulator agreed with Which? that there were problems with how unit pricing is used, with the result that many shoppers are confused by it or ignore it completely.

They also found hundreds of examples of other pricing and promotional activities that "could be in breach of consumer law".

For a limited period...

The CMA have been somewhat busy of late; this report comes hot on the heels of a Europe-wide investigation into car rental practises, and a year-long study of the retail energy market.

This investigation, however, was carried out in just three months, and has the potential to affect thousands of us every time we need to restock our cupboards.

Promotional offers account for an estimated 40% of grocery spending, according to the CMA's Nisha Arora.

And while the investigation [pdf] found that the issue isn't widespread, Ms Arora warns that "there are still areas of poor practice that could confuse or mislead shoppers".

The CMA say they'll now investigate these areas further, and should they find evidence that consumer law has been breached they will take enforcement action.

As well as finding problems with the way unit pricing is used, the CMA highlighted issues with reference pricing - referred to as "was/now" pricing.

For example, according to the Pricing Practises Guide (PPG), any reference price - the "was" - should be in place for at least 28 days before a promotion begins.

Legislation also states that promotional prices should not be in place longer than the original price - known as the "1:1 ratio".

The CMA found the vast majority of "was/now" offers satisfied these principles.

But at one unnamed retailer, only a third of products on promotion could be shown to satisfy the "1:1 ratio" and 21% - more than a fifth - were known to have been sold at the promotional price longer than their original price.

That supermarket was found to have satisfied the 28 day principle, but promotions lasted longer than four weeks.

That's like the example Which? provided when they submitted the complaint, whereby a store sold 500g packs of McVities Digestives and Ginger Nuts for £1.09 for 29 days, then reduced the price to 98p for 81 days.

At the supermarket the CMA examined, promotions lasted an average of 37 days longer than sales at the reference price.

In the worst case, a product was sold at a promotional price for 73 days longer than it was sold at the reference price.

That supermarket was also found to be adding reference pricing to some promotions at least two weeks after they had begun.

Say, for example, a good sized box of washing powder had been on sale for £7 previously, but was then put on offer at £5. After a fortnight or more, a promotional label would appear by the product declaring "Was £7, now £5".

The label isn't technically lying, but there are a few issues with this kind of practice.

First, it gives the suggestion that the promotion is new.

Secondly, the CMA say it can be argued that the reference price itself is no longer genuine and therefore can't be used to make a meaningful comparison.

They give the example of a product being sold under two successive offers, with no return to the original price in between: Advertising first states that it "was £9, now half price", then, immediately after that offer ends, that it "was £9, now a third off".

If the first offer continues long enough, the CMA suggest that price could well be the new accepted price of the product - so as well as being less generous than the first promotion, the second offer is, in effect, raising the price of the product.

Price per what?

In both promotions and on a day to day basis, there are also concerns about the clarity with which unit pricing is used.

Most of us accept that bigger is cheaper, and that own brands are less expensive. Unit pricing should help us to see if and when that isn't actually the case.

Toilet roll is a brilliant example of this: we'd expect a nine roll pack of a supermarket's own brand to cost far less than a nine pack of Andrex.

Looking at the unit price, which tends to be per sheet or per 100 sheets, we can usually confirm that is indeed the case.

But research carried out for the CMA found that many people find it difficult to picture what the units used look like, and therefore ignore the unit price even when it tells them in simple terms "this one is cheaper than that one".

Some of the retailers the CMA spoke to said they found customers were more likely to buy products when the unit reflected how they used the product.

People buying washing powder, for example, would seem keener on being told how much it costs per wash than they are to be told how much 100g of it costs.

Which?'s issue was that when customers do try to use unit prices, they aren't consistent - for example, they refer to bananas being priced per kg, or per fruit.

With other items, some brands of soup or ketchup, for example, will have a unit price "per 100ml" while others are described as "per 100g".

As well as making comparing like with like more complicated than it needs to be, the CMA say some people felt the differences in unit price were so small they wouldn't be much of a saving.

Certainly, a difference of 0.1p per biscuit doesn't make much odds to the price of one 12 pack of jaffa cakes compared to another - but the differences often aren't that small, and they can add up to considerable savings on the full sized products.

The CMA have produced a guide to unit prices to try to help deal with the confusion and apathy surrounding them, which is available here [pdf].

They were bigger when I was younger

On a related note is the issue of smaller product sizes.

Which? have been campaigning for some time about what they see as products shrinking without prices changing to reflect their new size.

The CMA say that when they spoke to retailers, most said it was highly unusual for the products they stocked to change size more than once a year, in line with manufacturers' price reviews.

Manufacturers, meanwhile, told the investigation that the cost of resizing packaging potentially offset any savings made by decreasing the contents.

Where we do often find differently sized products is in the discount sector - which we've explained in relation to Poundland.

But overall, the CMA were happy that shrinking products aren't a major concern for supermarket shoppers.

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