Pricing practices in the groceries market

Pricing Practices in

the Groceries Market

Response to a super-complaint made by

Which? on 21 April 2015

16 July 2015

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Contents

Page

1. Summary .............................................................................................................. 1

The super-complaint ............................................................................................. 1

The CMA’s investigation ....................................................................................... 2

2. Introduction ......................................................................................................... 12

The super-complaint process .............................................................................. 12

Issues raised in the super-complaint ................................................................... 12

Framework for assessment ................................................................................. 13

Information gathering .......................................................................................... 14

The structure of the response ............................................................................. 15

3. Market and regulatory context ............................................................................ 16

The industry ........................................................................................................ 16

Regulatory framework ......................................................................................... 17

Consumer protection enforcement landscape .................................................... 20

Summary of relevant recent and ongoing work ................................................... 22

4. Super-complaint issue 1: special offers .............................................................. 24

The issue ............................................................................................................ 24

Evidence and analysis ........................................................................................ 33

Conclusions ........................................................................................................ 52

5. Super-complaint issue 2: unit pricing .................................................................. 55

The issue ............................................................................................................ 55

Evidence and analysis ........................................................................................ 58

Conclusions ........................................................................................................ 73

6. Super-complaint issue 3: pack sizes ................................................................... 77

The issue ............................................................................................................ 77

Evidence and analysis ........................................................................................ 79

Conclusions ........................................................................................................ 88

7. Super-complaint issue 4: price-matching ............................................................ 90

The issue ............................................................................................................ 90

Evidence and analysis ........................................................................................ 94

Conclusions ...................................................................................................... 108

8. Summary of recommendations and proposed next steps ................................. 110

Further action to be undertaken by the CMA .................................................... 110

Recommendations for action to be taken by others .......................................... 110

9. Glossary ............................................................................................................ 113

1. Summary

The super-complaint

1.1 On 21 April 2015, Which? submitted a super-complaint to the CMA entitled

‘Misleading and Opaque Pricing Practices in the Grocery Market’. Which?

raised concerns relating to:

 confusing and misleading special offers that make extensive use of price

framing, including reference pricing, volume offers and free offers;

 a lack of easily comparable prices because of the limitations of unit

pricing;

 reductions in pack sizes without any corresponding price change; and

 price-matching schemes operated by particular retailers which may falsely

lead consumers to believe they have the best deal or do not need to shop

around.

1.2 The super-complaint also identified the following areas that Which? considers

the CMA should address:

 the extent to which the cumulative effect of any potentially confusing and

opaque pricing practices in the grocery market affects consumers’ ability

to obtain best value and make informed purchasing decisions;

 the drivers of any such practices and their pervasiveness within the

market; and

 any changes that are needed to enable consumers to make truly informed

choices and obtain best value.

1.3 On receipt of a super-complaint, the CMA is required, within 90 days, to

publish a response saying whether or not it has decided to take any action in

respect of the super-complaint and, if it has decided to take action, what

action it proposes to take. The response must state the CMA’s reasons for its

proposals.

The CMA’s investigation

Approach

1.4 The CMA has undertaken its investigation with a view, firstly, to considering

the nature and extent of the practices identified by Which? in the super-

complaint. To do so, we have gathered evidence directly from traders

(including both retailers and manufacturers), commissioned data to establish

the prevalence of particular pricing and promotional practices, and spoken

with others in the consumer landscape, including Trading Standards Services

and traders’ primary authorities.

1.5 We have then considered the extent to which particular practices have the

potential to lead to consumer detriment. We have drawn on academic

research and studies, evidence of consumers raising these issues with

traders or directly to bodies such as Citizens Advice, Trading Standards

Services and the Advertising Standards Authority, and commissioned external

research and focus group work in relation to particular issues identified in the

super-complaint. We have also drawn on the material provided to us by

Which? in support of the super-complaint.

1.6 We have considered whether particular practices identified during our

investigation are likely to comply with relevant consumer protection legislation.

Where we identified divergent practice, particularly in connection with traders’

interpretation of the applicable legislation and guidance, we sought to

understand the underlying reasons, and gathered views directly from traders

and others in the consumer landscape in relation to the effectiveness and

clarity of the existing regime. We were then able to draw together particular

recommendations to address the issues that were highlighted.

1.7 Although limited to a 90 calendar day statutory timetable, the CMA has been

able to engage extensively with a wide range of stakeholders, including

retailers, trading standards bodies, trade bodies, consumer bodies, suppliers

and manufacturers, regulators, government departments, academic bodies,

research bodies and members of the public. The full list of stakeholders who

have contributed to our investigation is set out at Annex A. The CMA is

grateful to all contributors for their willingness to assist in its work, which has

allowed the CMA to consider the issues by Which? and determine whether,

and if so what, action is appropriate in relation to these issues.

Overall conclusions

1.8 We set out below our high level conclusions in relation to each of the four

main practices identified by Which? in the super-complaint. Our investigation

into these practices highlighted the following overall themes:

(a) Retailers have a good awareness of the key consumer protection

legislation and guidance that applies to the sale of grocery products. Most

retailers had put systems in place designed to prevent the potential for

pricing and promotional practices to mislead.

(b) We have nevertheless encountered examples of particular pricing and

promotional practices which, in our view, have the potential to mislead or

confuse consumers and could lead to a breach of consumer law. Where

we have encountered such practices, the CMA will take further action with

the businesses concerned to address these issues and secure any

changes necessary. If this further work reveals clear evidence of

breaches of consumer law, this could lead to enforcement action.

of potentially misleading special offers is relatively limited, and in some

respects concern only a limited number of businesses and/or promotional

practices.

(d) However, there is more that can be done to further increase levels of

compliance and reduce the incidence of the problems that we have seen.

Therefore, in addition to our direct follow-up work with the relevant

businesses, we are recommending further action to clarify the guidance

that applies to pricing practices. The CMA will also build on our findings

and compliance work to support Trading Standards Services in focusing

their future monitoring, compliance and enforcement work. Together,

these further actions should help to improve compliance levels, reduce

the problems that consumers are encountering, bring greater clarity to

consumers in making shopping decisions, and simplify the regulatory

landscape for traders.

(e) The incidence of formal complaints is low, but behavioural studies and

surveys (including those conducted by Which?) along with reviews of

social media and information from retailers, suggest that consumers

notice that promotions do not always present the best value. Given that

enforcement levels within Trading Standards Services are largely driven

by complaints, it is important for enforcers to have access to an accurate

picture of the prevalence of potentially detrimental promotions by

considering consumer complaints from a range of different sources. In

particular, consumers appear to be turning to different channels to

express dissatisfaction about particular pricing practices, for example

social media or online forums.

(f) In relation to unit pricing, we agree with Which? that issues of legibility

and consistency are causing unnecessary confusion for consumers. We

have also found that a clear and consistent approach to unit pricing would

bring about benefits across nearly all of the issues raised by Which?, in

particular by equipping consumers with the information to make simple

and meaningful comparisons between different products, irrespective of

brand, size, and any ongoing promotional activity. We are recommending

that the law and guidance in this area be changed. This will need to be

accompanied by consumer education to help more consumers make

better use of this information and we call on Which? and other consumer

representative organisations to work with us to inform and educate

consumers about the effective use of unit prices.

1.9 The CMA’s focus is on enhancing consumer decision making and choice to

drive competition. Our work highlights that, even in markets typified by intense

price competition and high levels of price transparency, pricing and

promotional practices have the potential to mislead and confuse consumers.

In our view, consumer confidence in the integrity of pricing and promotional

activity is a key driver of competition. Thus, implementing our

recommendations in relation to the consumer landscape has the potential to

further stimulate and intensify levels of competition. Although we have not, as

part of our investigation, considered pricing or promotional activity in other

sectors, our findings are also likely to be of broader application to other

sectors and, where acted upon, are likely to bring similar benefits to

consumers and competition.

Issue 1: special offers

1.10 The super-complaint raised concerns about potentially confusing and

misleading special offers. Which? submits that its research repeatedly

highlights a number of persistent problems with the way in which grocery

prices are displayed, suggesting a better deal for consumers than is really the

case. This includes concerns expressed by consumers on online fora,

including the Which? Conversation web-pages.

We note that a petition launched by Which? in parallel with its super-complaint, calling for an end to misleading

pricing, has garnered more than 100,000 signatures

1.11 Which? highlights in particular the use of reference (‘was/now’) pricing to

suggest an offer that is not genuine (including in respect of seasonal

products), increasing the price of individual products before they are included

in multi-buy offers, and claims that larger packs represent better value where

this is not the case (in that the unit price of a smaller pack is lower).

1.12 The CMA has sought evidence from retailers and manufacturers to

understand the prevalence of different types of promotions and the factors

that influence which type of promotion is used and when. We also

commissioned data from mySupermarket to assess the extent to which

retailers are using certain promotions in a manner that potentially raises

concerns, with a particular focus on the practices highlighted by Which?.

1.13 The evidence and data gathered by the CMA have highlighted examples of

particular pricing and promotional practices which, in our view, have the

potential to mislead consumers and thus lead to a breach of the Consumer

Protection from Unfair Trading Regulations 2008 (CPRs).

1.14 Where we have encountered such practices, the CMA will take further action

with the businesses concerned to address these issues and secure any

changes necessary. If this further work reveals clear evidence of breaches of

consumer law, this could lead to enforcement action.

1.15 In particular, we were concerned that, in some cases, certain retailers

appeared to use reference pricing for inappropriately long periods of time, in

particular by using ‘now’ prices for periods that significantly outlasted the

period during which the ‘was’ price applied. Further, we have seen examples

of certain retailers increasing the price of products prior to the launch of a

volume promotion.

1.16 The evidence and data that we have gathered shows that the prevalence of

these issues is relatively limited, and in some respects concern only a limited

number of businesses and/or promotional practices. The majority of

promotions reflect internal policies and systems that generally demonstrate a

sound approach to compliance.

1.17 However, there is more that can be done to further increase levels of

compliance and reduce the incidence of the problems that we have seen.

Therefore, in addition to our direct follow-up work with the relevant

businesses, our response to the super-complaint highlights particular areas

where greater clarity should be provided through guidance to improve the

state of compliance with the key legislation in this area. We therefore

recommend that the Chartered Trading Standards Institute (CTSI) clarifies,

through guidance, how the CPRs apply to certain promotional practices. This

includes bringing together the requirements of the existing Pricing Practices

Guide (PPG) and the OFT’s 2012 principles on food pricing display and

promotional practices into a revised set of guidance as to the likely application

of the CPRs. In doing so, we recommend they give particular consideration to:

(a) clarifying the features of a genuine retail price and set out whether, and in

what circumstances:

(i) promotional practices can be run sequentially and use a reference

price ‘established’ in a previous volume promotion

(ii) an earlier reference price frame (‘was’ price) can be used after the

price of the product has already been lowered for a period (so the

reference price does not refer to the last applicable price)

(iii) a reference price promotion that involves two consecutive stages of

promotional pricing can be used, where the second stage affords a

less generous discount than the first stage. For example, a product is

involved in a ‘half price, now £4.50’ and then a ‘1/3 off, now £6’

promotion

(iv) out of season prices can be used as reference prices for seasonal

products, and

(v) businesses can use a reference price when they have not sold a

product at that price in the store where the discount is applied.

(b) setting out good practice in relation to whether, and in what

circumstances, it is appropriate and not misleading for the prices of

individual products to change before and during a volume promotion.

would be appropriate and the specific application of this to online

purchases where consumers may not pay the price they expect when the

promotion ends between the consumer ordering the goods and them

being delivered.

1.18 Which? also raised the issue of larger pack sizes that do not represent better

value for money than smaller pack sizes. The data that we commissioned has

highlighted that larger pack sizes will not always represent the best value for

money (even when promotional activity on smaller pack sizes is excluded

from consideration). We were not, within the constraints of the timeframe of

this investigation, able to consider the separate question of whether

manufacturers or retailers are promoting larger pack sizes in a manner that

suggests that they represent best value. The limited evidence gathered on

this issue during our investigation indicated that on-pack advertising using

'value' and 'free' statements is decreasing, in response to consumers’ dislike

for this practice. However, were such claims of value to be made in relation to

larger packs with a higher unit price than a smaller pack, we would be

concerned that this practice would have the potential to breach the CPRs.

This is an area where our recommendations below in relation to unit pricing

have the potential to make clearer information available to consumers to help

them identify when a larger pack size represents good value for money.

1.19 We have found that retailers generally have appropriate ex ante systems in

place to prevent promotional practices that breach their interpretation of the

requirements of the CPRs. However, our investigation has identified there is

the potential for errors to occur. As well as addressing specific issues, as

discussed above, we recommend that retailers do more to identify why

compliance issues are arising, in particular considering whether the balance

of ex ante and ex post controls is optimal to identify all potential problems and

further improve their approach to compliance.

1.20 The CMA will also build on its findings and compliance work to support

Trading Standards in focussing their future monitoring, compliance and

enforcement work and help these bodies to effectively target their work at

areas where there is the greatest potential for consumer detriment.

Issue 2: unit pricing

1.21 Unit pricing is a potentially important tool for consumers to ensure they get the

best deal when comparing products. This is particularly the case where it is

available for promotions as it can enable consumers to make best value

comparisons between products on promotion and those that are not.

1.22 The super-complaint raised concerns that there are problems with unit pricing,

which means that prices are not easily comparable. Three specific concerns

were highlighted: legibility of unit prices, inconsistency of units for similar

products and missing unit prices when there is a promotion. In particular,

Which? suggested that complexity and potential ambiguities in the regulatory

requirements can cause difficulties for retailers.

1.23 The CMA sought information from retailers about their approach to unit pricing

and conducted a small-scale review of unit price examples both in situ and

online and in conjunction with Trading Standards Officers. In addition, the

CMA commissioned research into how consumers use unit prices in the

context of grocery shopping.

1.24 Over the course of our investigation we have observed many of the same

complexities and inconsistencies in unit pricing arrangements as expressed

by Which? that may adversely affect consumers’ ability to make meaningful

comparisons between products. In particular, whilst we found that retailers are

attempting to comply with the unit pricing legislation, in the absence of clear

guidance and/or relevant case law, there are differing interpretations and

inconsistencies across the grocery market as to how unit prices should be

presented. This is particularly evident for products on promotion where unit

prices that reflect the promotional price are not given consistently.

1.25 In our qualitative research, unit pricing was only used by a minority of

participants, and generally for particular products rather than systematically.

Given how useful unit pricing can be in helping consumers to take informed

decisions, the CMA has identified various respects in which the existing

regime can be improved, which in turn have the potential to increase the

number of consumers who use unit pricing and to make unit pricing a more

effective price comparison tool. In particular:

 In relation to the legibility of unit pricing information, the CMA

recommends the Department for Business, Innovation and Skills (BIS),

produces best practice guidelines on the legibility of unit pricing

information, to provide greater clarity about the requirements of the Price

Marking Order 2004 (PMO) in this regard. This would help TSS and

primary authorities assess compliance. We also recommend that retailers

introduce any resulting changes to labelling as soon as practicable.

 In relation to the consistency of unit pricing information, the CMA

recommends that BIS’ review of the PMO and accompanying guidance,

with the Expert Working Group, changes its focus to consider how

Schedule 1 to the PMO could be clarified and simplified. We also

recommend that BIS notes the findings from our qualitative research and

considers what further research, building on the findings from our

qualitative research, is needed into how consumers use unit prices to

ensure the requirements help as many people as possible to use them in

their decision making.

 In terms of the application of unit pricing to promotions, the CMA found a

number of inconsistent approaches that are potentially confusing

consumers. The CMA recommends that BIS review the legislation and

guidance that stipulates how unit pricing applies to products on promotion,

particularly with reference to the requirements of the CPRs and the

ongoing review of the PPG.

1.26 As discussed above in relation to special offers, we have found that retailers

generally have good appropriate ex ante systems in place to deliver

compliance with the regulatory requirements. However, our investigation has

identified there is the potential for errors to occur and for incorrect units of

measurement to be used for unit pricing in store, as well as problems with

legibility. As before, we recommend that retailers do more to identify why

compliance issues are arising and consider whether the balance of ex ante

and ex post controls is optimal to identify all potential problems and further

improve their consistency of compliance.

1.27 In addition, to help increase consumers’ understanding and use of unit pricing

we are publishing, alongside this response, high level consumer advice about

the use of unit pricing. We consider that consumer education has the potential

to assist consumers with using unit prices more effectively in their purchasing

decisions. We call on Which? and other consumer representative

organisations to work with us to inform and educate consumers about the

effective use of unit prices (both now, and in light of any changes brought

about to the regime in light of our recommendations above).

Issue 3: pack sizes

1.28 Which? expressed concern about reductions in the size of grocery products

that were not accompanied by price reductions, and submitted that this

practice could mask price rises and make it difficult for consumers to identify

the best value product. Which? suggested that consumers should be informed

when the size of a product reduced and there was not a corresponding price

decrease.

1.29 The CMA sought evidence on this issue from retailers and manufacturers to

understand the key drivers of pack size changes and any observable trends. It

then considered the information that is currently being provided to consumers

when pack sizes change to assess whether consumer detriment and/or a

potentially misleading commercial practice arises from current practice. We

considered this issue in relation to both branded and own-brand products.

1.30 Our investigation revealed a number of complex considerations that will

underpin a manufacturer’s decision to reduce the size of a particular product.

In particular, pack size reductions do not stem exclusively from a desire to

increase the effective price of a product, but frequently reflect a number of

other considerations, including environmental and health factors alongside

product innovation.

1.31 Although consumers are likely to be less sensitive to pack size changes than

price changes, we found that this practice was likely to be constrained both by

the costs involved in re-sizing a product and by the risk of lost sales if

consumers perceive poor value for money and switch away to another

product. Further, the factors above highlight that pack resizing can also occur

for a number of reasons that bring benefits to consumers.

1.32 Most significantly, we have concluded that the information that is currently

being presented to consumers (ie the size of the product and its price) is

sufficient when a pack size changes, taking account of the relevant legislative

requirements. There are certain possible exceptions to this, notably when the

pack size change is ‘masked’ in some way, for example by making the revised

quantity and price difficult to identify or by failing to notify a consumer where

an item in an online basket of routinely purchased goods has decreased in

size. We have not encountered evidence of such practices during our

investigation, but manufacturers and retailers should continue to be alert to

particular circumstances in which pack size changes could potentially lead to

a breach of the CPRs.

1.33 We also agree with Which? that a clear unit price potentially affords

consumers with a helpful tool when making comparative decisions both

before, and following, a pack size change. Our recommendations above in

connection with unit pricing thus have the potential to improve consumers’

ability to take account of pack size changes in their decision making.

Issue 4: price-matching

1.34 The super-complaint raised concerns that price match schemes run by

retailers in the groceries market are set up and operated in different ways, are

potentially complex and may mislead consumers, negatively impacting their

appetite to shop around to seek the best deal.

1.35 We have sought evidence from retailers about how the price match schemes

are set up and operated and reviewed information provided to consumers by

retailers and the available explanatory information and terms and conditions.

We have also commissioned research into the impact of price match schemes

on consumer decision making through a survey.

1.36 We have not found evidence that the current approach to price match

schemes causes significant consumer harm. Evidence from the survey

commissioned by the CMA suggests that price match schemes may not have

a significant impact on consumers’ choice of retailer. There are several other

more important factors which seem to drive this choice. In a similar way, price

match schemes do not appear to generate large numbers of consumer

complaints, although we note there is some engagement by consumers on

social media on the operation of the schemes.

1.37 The evidence gathered from retailers confirms that there are important

differences in how price match schemes operate, in particular in relation to

their coverage of competitors, products and whether and how they offer

reimbursement for consumers. While there is the scope for these differences

to represent a complex picture for consumers, there are many valid ways of

running such a scheme that are likely to be possible under the relevant

regulatory provisions and there is no requirement for them all to be the same.

The CMA does not consider that a one-size-fits-all approach would

necessarily lead to the best outcome for consumers.

1.38 However, in order to ensure that retailers comply with relevant legislation and

do not mislead consumers in their decision making, it is important that

information is presented clearly and accessibly to consumers about the nature

of the price match schemes and how they operate (for example in terms of the

basis for comparison between products and the limitations or restrictions that

may apply). The CMA’s initial assessment of the information provided to

consumers is that it is generally relatively clear, although it notes that the

consumer survey evidence indicates a low level of understanding of the

schemes. There are some approaches that are clearer than others and the

CMA will engage with the retailers and primary authorities of relevant

supermarkets where it has identified there are areas that could be improved.

The CMA recommends that retailers and their primary authorities give

consideration to the consumer information presented and ensure it is

sufficiently transparent and accessible.

1.39 We note that self-regulation, through the role of the Advertising Standards

Authority in enforcing compliance with relevant advertising codes, plays an

important role in this area. A number of issues have been raised, including

many by retailers challenging the comparative advertising claims of their

competitors, and the ASA has made a number of formal rulings. This

willingness of retailers to bring challenges for resolution through this route

suggests it is an important check on potentially misleading advertising to

mitigate the risk of price match schemes giving inaccurate or misleading

information to consumers.

See paragraph 3.13 and Annex B.

2. Introduction

2.1 This Chapter provides an overview of the super-complaint process, the issues

raised by Which? in the super-complaint and the CMA’s approach to its

investigation. Further detail on its engagement with stakeholders during the

investigation is set out in Annex A.

The super-complaint process

2.2 A super-complaint is defined under section 11(1) of the Enterprise Act 2002

(EA02) as a complaint submitted by a ‘designated consumer body’ that 'any

feature, or combination of features, of a market in the UK for goods or

services is or appears to be significantly harming the interests of consumers'.

The Consumers’ Association (Which?) is a designated consumer body

for the

purposes of the EA02.

2.3 Section 11(2) of the EA02 requires the CMA, within 90 days after the day on

which it receives the super-complaint, to publish a response saying whether

or not it has decided to take any action in respect of the complaint and, if it

has decided to take action, what action it proposes to take. The response

must state the reasons for the CMA's proposals (section 11(3) EA02).

2.4 This document sets out the CMA's reasoned response to the super-complaint

entitled ‘Misleading and Opaque Pricing Practices in the Grocery Market’,

submitted by Which? on 21 April 2015.

Issues raised in the super-complaint

2.5 The super-complaint focuses on grocery retailing in the UK, defined by

Which? to cover food, non-alcoholic and alcoholic drink, cleaning products

and household goods, purchased both in store and online for home

consumption. It raises concerns about practices relating to:

 confusing and misleading special offers that make extensive use of price

framing, including reference pricing, volume offers and free offers;

 a lack of easily comparable prices because of the limitations of unit

pricing;

The Secretary of State can make any organisation a designated consumer body, provided they represent the

interests of consumers of any description and also meet any other criteria published by the Secretary of State

which are applied when determining whether to make or revoke a designation. It is expected that those

designated will be informed bodies who are in a strong position to represent the interests of groups of consumers

and able to provide solid analysis and evidence in support of any super-complaint they may make.

 reductions in pack sizes without any corresponding price change; and

 price-matching schemes operated by particular retailers that may falsely

lead consumers to believe they have the best deal or do not need to shop

around.

2.6 The super-complaint also identifies the following areas that Which? considers

the CMA should address:

 The extent to which the cumulative effect of any potentially confusing and

opaque pricing practices in the grocery market affects consumers’ ability

to obtain best value and make informed purchasing decisions.

 The drivers of any such practices and their pervasiveness within the

market.

 Any changes that are needed to enable consumers to make truly informed

choices and obtain best value.

Framework for assessment

2.7 The CMA’s mission is to make markets work well in the interests of

consumers, businesses and the economy. The CMA focuses its efforts and

resources on deterring and influencing behaviour that poses the greatest

threat to consumer welfare. It intervenes in order to protect consumer welfare

and, in the process, drive higher productivity growth. It also recognises the

need to avoid imposing unnecessary burdens on business.

2.8 The issues raised by Which? in the super-complaint fundamentally concern

consumer protection issues. In considering our response to the issues raised,

the CMA has been guided by section 11 of the EA02, and its powers in

relation to the relevant consumer protection regulation. The CMA has also

had regard to its powers to initiate market studies and market investigations

when considering its response to super-complaint.

2.9 In seeking to target both its resources and enforcement strategy, the CMA

uses its Prioritisation Principles

to prioritise according to the impact of work

on consumers and the strategic significance of the work, balanced against the

risks and resources involved. It also takes account of the activity, capacity and

interests of its partners.

CMA Prioritisation Principles (CMA16).

2.10 Which? defines the scope of its super-complaint as covering ‘groceries

retailing’ which it considers includes food, non-alcoholic and alcoholic drink,

cleaning products and household goods. In establishing the scope of its

investigation, the CMA has additionally been guided by the Competition

Commission’s (CC) 2008 Groceries market investigation report which defines

groceries as including ‘food (other than that sold for consumption in the store),

pet food, drinks (alcoholic and non-alcoholic), cleaning products, toiletries and

household goods’.

2.11 As identified in the super-complaint, there is likely to be an interaction

between the four issues identified which, in combination, have the potential to

increase confusion for consumers. To the extent that each of the practices

may contribute to, or ameliorate, this risk, this is discussed under each of the

issues.

Information gathering

2.12 In preparing its response to the super-complaint, the CMA has gathered

evidence from a wide range of sources. In addition to a general invitation to

comment publicised on its website, the CMA pro-actively sought the views of

a wide range of stakeholders including those representing consumers,

industry and regulators through face-to-face meetings, telephone calls and

targeted written information requests.

2.13 The CMA has also assessed the practices raised by Which? against the

existing relevant legislative framework and the applicable guidance.

2.14 In addition, the CMA has conducted its own research into pricing practices in

the grocery market, including analysing of social media

and complaints

registered on the databases held by Citizens Advice, Trading Standards

Services and the Advertising Standards Authority. The CMA has also

procured third party data showing the prevalence of particular types of

promotions and commissioned external research into the way in which

consumers understand and use unit pricing information and the role price

match schemes play in consumers’ decision making. We have also evaluated

Groceries market investigation (CC). The CC’s report further clarifies this definition by stating that it excludes

petrol, clothing, DIY products, financial services, pharmaceuticals, newspapers, magazines, greeting cards, CDs,

DVDs, video and audio tapes, toys, plants, flowers, perfumes, cosmetics, electrical appliances, kitchen hardware,

gardening equipment, books, tobacco and tobacco products.

Annex A provides further detail on the CMA’s engagement with stakeholders.

The CMA uses software at a broad level to assist in identifying the potential for consumer detriment, and

informing and evaluating our work. The CMA has used digital engagement tools to search for relevant comments,

discussions and complaints made via social media.

a range of published literature on relevant themes to assess the evidence

available in relation to these issues.

The structure of the response

2.15 The remainder of this response is structured as follows:

 Chapter 3 provides a high-level summary of the structure of the industry

and recent developments in pricing practices, the key features of the

regulatory framework applicable to groceries pricing, the consumer

protection enforcement landscape and recent and ongoing work of

relevance to the issues under consideration.

 Chapters 4 to 7 set out the CMA’s analysis of the evidence in relation to

Which?’s concerns about special offers, unit pricing, pack sizes and price-

matching respectively.

 Chapter 8 summarises the CMA’s recommendations and proposed next

steps.

 Annex A provides an overview of the stakeholder engagement carried out

by the CMA during the course of its investigation and a list of contributors.

 Annex B provides further detail on the regulatory context, including

primary and secondary legislation, and self-regulation. It also includes an

overview of the consumer protection enforcement landscape and an

outline of recent and ongoing work of relevance to the issues under

consideration.

 Annex C discusses the economic efficiencies and theories of harm

relating to the issues raised by Which?

 Annex D outlines the findings from the data that we commissioned from

mySupermarket, together with the methodology that we used to scrutinise

that data.

 Annex E outlines the findings of the consumer survey commissioned by

the CMA.

 Annex F is a qualitative consumer research report prepared by BDRC

Continental and commissioned by the CMA for this investigation.

 Annex G contains the data gathered by the consumer survey

commissioned by the CMA.

3. Market and regulatory context

3.1 This chapter provides a high-level summary of the groceries industry and its

recent developments; the key features of the regulatory framework applicable

to groceries pricing; and the consumer protection enforcement landscape.

Annex B provides further detail on these areas.

The industry

Industry structure and recent developments

3.2 The groceries industry is large and estimates suggest that the UK retail

grocery industry was worth between £148 billion

and £178 billion in 2014.

Tesco, Asda, Sainsbury’s and Morrisons have been the largest retailers in the

industry for a number of years. However, as Figure 1 shows, the evidence

suggests that the industry has become less concentrated in recent years.

Figure 1: Share of grocery retailers, 2009-2014

Source: Page 170, Mintel, November 2014, ‘Supermarkets: More Than Just Food Retailing – UK’

Mintel (November 2014), Supermarkets: More Than Just Food Retailing – UK, page 170.

IGD (4 June 2015), UK Grocery Retailing.

3.3 Since 2011 these four largest retailers have seen a decline in their sales

shares, moving from a combined sales share of 67.6% in 2011 to an

estimated 64.2% in 2014. In contrast, Aldi and Lidl have seen significant

growth in their sales shares over the 2011 to 2014 period, moving from a

combined sales share of 4.4% in 2011 to an estimated 8% in 2014. Waitrose

has also seen more moderate growth in its sales share over the same period.

3.4 The structure of the Northern Ireland groceries industry differs in certain

respects from that in Great Britain. In particular, some of the larger retailers

with a presence in Great Britain do not have a presence in Northern Ireland

(Morrisons and Waitrose), certain retailers established in the Republic of

Ireland have a presence in Northern Ireland, and ‘symbol’ stores

(such as

Spar and Mace) account for a larger share of grocery sales than in Great

Britain.

3.5 Over the past year a variety of sources provide evidence of grocery price

deflation. For example, Kantar Worldpanel’s analysis suggests that a typical

basket of everyday items is now 2.1% cheaper than it was in 2014.

Similarly,

the Grocer Price Index (GPI)

first recorded year-on-year deflation in June

2014 and has done so every month since, with a record low for year-on-year

grocery price inflation of –2.5% in April 2015.

3.6 Finally, promotions are a prominent feature of the UK grocery industry.

Estimates suggest that around 40% of Great Britain’s grocery expenditure

on items on promotion.

The proportion of spend on promotions also varies

by retailer and by product category (reaching levels as high as around

60 to 70% for certain categories of impulse purchases, eg carbonated soft

drinks and confectionery).

Regulatory framework

3.7 The regulatory framework relevant to groceries pricing comprises several

pieces of primary and secondary legislation, codes of practice and guidance.

Symbol stores generally describe independent retailers that are members of a larger organisation, known as a

symbol group.

Kantar Worldpanel (6 May 2015), British consumers win with lower Grocery prices.

The Grocer Price Index is compiled by BrandView from over 70,000 grocery products across Asda, Morrisons,

Tesco and Sainsbury’s.

We have not been able to identify similar data for Northern Ireland or the whole of the UK.

Kantar Worldpanel data for the year ending 1 March 2015 as cited in Which?’s super-complaint of 21 April

2015, Misleading and opaque pricing practices in the grocery market, p9.

Based on data provided by Kantar Worldpanel for the year ending 29 March 2015

Each is briefly summarised below and more detailed information is provided in

Annex B:

 The Consumer Protection from Unfair Trading Regulations 2008

(CPRs)

contain a general prohibition of unfair commercial practices;

prohibitions of misleading commercial practices, whether by action or

omission; a prohibition of aggressive commercial practices, and outright

prohibitions of 31 specific practices which are considered unfair and

prohibited in all circumstances.

 The Business Protection from Misleading Marketing Regulations

2008 (BPRs)

prohibit businesses from advertising products in a way

that misleads/deceives traders and set out conditions under which

comparative advertising to consumers and business is permitted.

 The Consumer Contracts (Information, Cancellation and Additional

Charges) Regulations 2013 (CCRs)

require, among other things, that

certain relevant pre-contractual information must be provided before the

consumer becomes bound by a contract. They also provide consumers

with cancellation rights in certain circumstances for contracts made at a

distance or away from business premises (sometimes called ‘doorstep

contracts’).

 The Unfair Terms in Consumer Contracts Regulations 1999

(UTCCRs)

protect consumers from standard terms which could be used

to give the business an unfair advantage. Among other things, the

UTCCRs highlight that standard consumer contract terms should be fair

and use clear language that consumers can understand.

 The Price Marking Order 2004 (PMO)

requires traders to display

certain pricing information including, in some circumstances, the unit price

of a product in a way which is unambiguous, easily identifiable and clearly

legible. The unit price needs to be shown on a per kilogram or per litre

basis. In relation to specific categories of products, alternative units are

required and these are listed in Schedule 1 to the PMO. An Expert

Working Group convened by BIS is currently considering new draft

The Consumer Protection from Unfair Trading Regulations 2008. Also see the OFT’s guidance on the CPRs.

The Business Protection from Misleading Marketing Regulations 2008.

The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

The Unfair Terms in Consumer Contracts Regulations 1999. Note: The Consumer Rights Act received Royal

Assent on 26 March 2015 and its main provisions are likely to come into force in October 2015. In summary, the

Act brings together into one piece of legislation, the unfair terms legislation which applies to consumers when

dealing with businesses, repealing the UTCCRs.

The Price Marking Order 2004.

guidance on Schedule 1. Its objective is to explore the barriers to

achieving greater consistency in unit pricing in the legislation and its

guidance, and to identify a simple and pragmatic solution that would help

retailers to implement the legislation more effectively.

 The EU Food Information for Consumers Regulation (FICR)

affirms

the need not to mislead consumers. Article 7(1) of the FICR provides that

food information shall not be misleading as to the characteristics of the

food and, in particular, as to its quantity. Article 7(4)(b) provides that

Article 7(1) also applies to the presentation of goods, in particular their

shape, appearance or packaging, the packaging materials used, the way

in which they are arranged and the setting in which they are displayed.

 The Groceries (Supply Chain Practices) Market Investigation Order,

2009

contains the Groceries Supply Code of Practice

which

requires retailers to deal with their suppliers fairly and lawfully.

 The Pricing Practices Guide (PPG)

was republished by BIS in

November 2010. It has of itself no mandatory force and traders are not

under any legal obligation to follow the practices recommended. However,

it recommends to traders a set of good practices in giving the consumer

information about prices in various situations. The PPG is currently under

review by the Chartered Trading Standards Institute (CTSI).

 The Office of Fair Trading principles on food pricing display and

promotional practices (OFT Principles)

are a set of principles to

establish a more consistent approach across the market. The Principles

were developed by the OFT with a number of major UK supermarkets

following an investigation into groceries pricing in 2012 (in which the OFT

made no finding that the supermarkets investigated had breached the law

or were engaging in misleading promotional practices). The Principles

were designed to help ensure promotional claims are meaningful and

accurate. They cover two promotional practices: internal reference pricing

(for example, 'Was £3, Now £2' or 'Half Price' labels); and pre-printed

value claims on packs (for example, 'Bigger Pack, Better Value'). Eight

food and drink retailers agreed to use the principles within their

businesses. These are Aldi, The Co-operative, Lidl, Marks and Spencer,

Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the

provision of food information to consumers.

Groceries market investigation (CC).

BIS and Groceries Code Adjudicator (4 August 2009), Groceries Supply Code of Practice.

BIS (30 November 2010), Pricing practices: a guide for traders.

OFT (29 November 2012), Principles on food pricing display and promotional practices

Morrisons, Sainsbury's, Tesco and Waitrose. The principles were

originally published by the OFT, but have been adopted and endorsed by

the CMA.

 The UK Code of Non-broadcast Advertising, Sales Promotion and

Direct Marketing (CAP Code)

and the UK Code of Broadcast

Advertising (BCAP Code)

are codes of practice for all advertisers,

agencies and media which are designed to address misleading, harmful

or offensive advertising. The Codes are self-regulatory and are enforced

by the Advertising Standards Authority (ASA).

Consumer protection enforcement landscape

3.8 The following paragraphs provide a brief overview of the role of the key

organisations in the consumer protection enforcement landscape relevant to

the issues covered by the super-complaint. More detail on this is provided in

Annex B and further information on the CMA’s role and interaction with the

wider enforcement community can be found in the CMA publication Consumer

Protection: Guidance on the CMA’s approach to use of its consumer

powers.

3.9 The CMA shares its consumer protection powers with a number of partner

organisations. The CMA prioritises projects where there are systemic market

problems, where consumers are unable to exercise choice, or where we can

expect to achieve wider impact, for example, by developing the law or by

having a deterrent effect. This role complements and reinforces the effects of

our other work to improve markets and to support economic growth by

addressing problems where competition enforcement alone does not, or

cannot, make a market work well for consumers.

3.10 Trading Standards Services in England, Wales and Scotland are funded by

and accountable to local authorities. In Northern Ireland, the Trading

Standards Service is funded by and accountable to the Department of

Enterprise, Trade and Investment (DETI). Trading Standards Services in

England, Wales, Scotland and Northern Ireland are collectively referred to as

TSS in this response. For the purposes of this response, we refer to those

who carry out the work of TSS as Trading Standards Officers (TSOs).

CAP, UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code).

CAP, UK Code of Broadcast Advertising (BCAP Code).

Consumer protection – guidance on the CMA’s approach to use of its consumer powers (CMA7).

3.11 Both the CMA and TSS have enforcement powers under the CPRs. The

majority of local, regional and national enforcement action is carried out by

TSS, whilst the CMA focuses on systemic problems in markets.

3.12 Reforms to the consumer landscape in 2013 created the National Trading

Standards Board (NTSB), which is responsible for prioritising national and

cross-boundary local authority enforcement in England and Wales against

unlawful practices. The Convention of Scottish Local Authorities (CoSLA) has

created Trading Standards Scotland to perform the same role in Scotland.

Primary authorities

3.13 The Regulatory Enforcement and Sanctions Act 2008 established a statutory

scheme in which a business can choose to form a partnership with a local

authority in England and Wales, known as a ‘primary authority’.

A primary

authority acts as a key point of contact for a business that it partners with, in

relation to the business’ interactions with local authorities that regulate it. The

Trading Standards Service within a local authority will manage the primary

authority relationship with a business where it relates to fair trading, which will

include pricing practices. All primary authority officers are therefore also

TSOs. The primary authority is able to provide Primary Authority Advice to the

partner business, which that business can rely on. The primary authority is

also able to provide advice and guidance to other local authorities in relation

to how they exercise their regulatory functions in respect of the business.

3.14 A primary authority also leads regulation of the business on behalf of other

local authority regulators, including through the coordination of intelligence

and of responses to specific issues that arise.

3.15 In May 2015 BIS announced that it intends to extend and simplify the primary

authority scheme in the context of the proposed Enterprise Bill.

Primary Authority Supermarkets Group

3.16 The Primary Authority Supermarkets Group (PASG) enables the primary

authority officers for all of the supermarkets to meet and discuss issues which

are common across the market. The meeting is also attended by a

representative of the ASA, which is officially an observer and, in part, by

representatives of the supermarkets. The PASG holds four meetings a year

but discussions are also held by email between these meetings.

BIS (September 2013), Primary Authority Statutory Guidance.

Summary of relevant recent and ongoing work

3.17 Below is a summary to illustrate, in addition to the reviews noted above, the

kind of enforcement and regulatory activity, and the level of scrutiny, which

has already been applied to the issues which are the subject of the super-

complaint as well as to highlight certain ongoing work in this market. Key

examples are summarised below and more detail is provided in Annex B.

Office of Fair Trading

3.18 In addition to the principles on food pricing display and promotional practices,

and the investigation which led to their publication, the OFT carried out other

key pieces of work of relevance to the issues under consideration, including:

 Advertising of Prices Market Study.

In 2010 the OFT published a

market study report into advertising of prices. The report developed a

framework to help analyse which types of price advertisements were more

likely to cause the OFT concern. The report also set out specific

considerations on the basis of which the OFT would prioritise enforcement

action.

 Investigations into the use of misleading reference pricing by certain

furniture and carpet businesses.

In 2012, the OFT opened a number

of formal investigations under Part 8 of the EA02 to consider whether six

retailers within the furniture/carpet market were engaging in the use of

misleading reference pricing. The OFT closed its investigations after

receiving commitments from the retailers. More detail about the

investigations and the factors which led OFT to question whether genuine

reference prices were being used is provided in Annex B.

2008 Competition Commission UK Groceries Market Investigation

3.19 In 2008, the CC published its final report on its market investigation into the

UK groceries market.

One of the main outcomes of the work was the

Groceries (Supply Chain) Market Investigation Order 2009 and the

establishment of the Groceries Supply Code of Practice, monitored and

enforced by the Groceries Code Adjudicator. However, this investigation,

although covering a large number of issues related to the state of competition

OFT (15 October 2009), Advertising of prices.

OFT (1 November 2012), Furniture and carpet businesses: misleading reference pricing.

Groceries market investigation (CC).

in the UK grocery retailing, did not specifically address any of the four main

issues identified by Which? in its super-complaint.

CPRs enforcement by TSS

3.20 The CMA is aware of two prosecutions under the CPRs relating to the issues

under consideration:

 In 2013 Birmingham City Council Trading Standards Service prosecuted

Tesco for 12 offences of engaging in an unfair commercial practice under

the CPRs relating to the establishment of a reference price for

strawberries sold on promotion. The investigation was initiated following a

consumer complaint. Tesco was fined £300,000 after pleading guilty to

four misleading actions.

 In 2014 Torfaen County Borough Council Trading Standards Service

investigated Tesco after a consumer complained that peanuts were

incorrectly labelled in store. The peanuts were reduced from £1.99 to

£1.00. However, the shelf edge label incorrectly displayed the pack size

as 165g (rather than 150g) and the promotional unit price as 60.6p per

100g (rather than 66.7p per 100g). Tesco pleaded guilty to five misleading

actions under the CPRs for providing false information on the shelf edge

label and was fined £21,000.

4. Super-complaint issue 1: special offers

4.1 This chapter responds to the concerns raised by Which? in its super-

complaint in relation to potentially confusing and misleading special offers. It

sets out the issues raised, our assessment of them, summarises the

conclusions reached, and makes recommendations for future work.

The issue

The super-complaint

4.2 The first pricing practice identified by Which? in the super-complaint is

‘confusing and misleading special offers that make extensive use of price

framing,

including reference pricing, volume offers and free offers’. Which?

states in particular that ‘widespread misleading reference pricing’ lies at the

heart of its concerns.

4.3 Which? submits that its research has ‘repeatedly found a number of persistent

problems with the way in which prices are displayed to suggest a better deal

than is really the case’. Which? highlights the following types of promotions

that, in its view, are problematic:

 Using reference price promotions (‘was/now’ pricing) to suggest an offer

that is not genuine. According to Which?, this may arise where the

product is priced at the lower ‘now’ price for a longer period of time than at

the higher ‘was’ price. Which? gives the example of a handwash product

priced at £1.80 for seven days and then labelled as ‘was £1.80, now 90p’

for 84 days.

 Increasing the price of individual products before they are included in a

volume promotion (eg a ‘3 for 2’ promotion). Which? states that this may

result in the promotional saving being less than claimed or non-existent,

or products being more expensive when they are included in a volume

promotion than when they are sold individually before or after the

promotion. Which? gives the example of a rice product being increased

from £1 to £1.58 at the same time that it was included in a ‘2 for £3’ multi-

buy promotion. After the multi-buy promotion, the price returned to £1.

According to Which?, a further issue may arise where the increased price

Price frames refer to the ways in which prices and promotions are communicated to consumers. For example,

a product reduced from £2 to £1.50 can be communicated in a number of ways such as ‘was £2, now £1.50’ or

‘25% off, now £1.50’ or simply ‘£1.50’.

of the individual product is used as the higher ‘was’ price in a ‘was/now’

promotion that immediately follows the multi-buy promotion.

 Pricing seasonal products at the higher price only out of season. For

example, Which? refers to Easter eggs priced at £7.49 for ten days in

January and then at £5 for 51 days.

 Advertising larger packs as better value where the unit price of the larger

pack is more expensive than smaller packs. Which? highlights a pack of

12 toilet rolls marked as ‘great value’, despite being more expensive per

roll than a four pack of toilet roll produced by the same manufacturer.

4.4 Which? says it has also found that ‘products can rotate on and off offer, which

makes it difficult for consumers to identify the true value of the product’.

4.5 According to Which? the types of promotions and price frames that it has

focused on have the potential to be misleading and cause consumer

detriment. In particular, Which? considers consumers may suffer ‘financial

detriment and wasted time through shopping errors, over-buying, buying a

product that is not of the value that is assumed and emotional detriment

through frustration and annoyance’.

4.6 Which? asserts that the problems they have identified are widespread and

persistent, despite regulatory guidelines (such as the PPG and the OFT

Principles

) that have attempted to improve pricing practices.

Evidence provided by Which?

4.7 Which? states that it has regularly found examples of the problems identified

at paragraph 4.3 above ‘across a wide range of supermarkets over a number

of years’. The super-complaint is supported by material drawn from previous

investigations and campaigns it undertook between December 2008 and April

2015, identifying particular examples of pricing and promotional practices that,

in Which?’s view, illustrate the concerns voiced in the super-complaint.

Certain of the earlier Which? investigations are also supported by survey

material, in particular seeking views from consumers in relation to their

attitudes towards, and confidence in, promotions run by grocery retailers. We

have also had regard to various ‘Which? Conversation’ webpages and its

online petition relating to ‘misleading pricing’. Consumers have posted various

See Annex B.

comments on these webpages highlighting examples of promotions that, in

their view, may be misleading.

4.8 The CMA has also considered further material provided by Which? following

its submission of the super-complaint. This includes a June 2015 Which?

magazine feature

highlighting certain promotional practices by grocery

retailers in relation to branded goods. On 12 June 2015, Which? also provided

the CMA with a further study that it had undertaken in order to understand the

potential impact on consumers of misleading promotions. It was based on a

review of the pricing of 50 branded food and toiletry products across six

supermarkets using data from mySupermarket (between January and June

2015). It assessed promotions as potentially misleading by reference to

guidelines in the PPG and the OFT Principles.

Which? considered instances

of reference pricing, as well as the long term use of volume promotions and

the frequency of volume promotions and price reductions over the period

under review. Where relevant, we refer further to the material provided by

Which? in support of the super-complaint in our assessment below.

Other evidence considered by the CMA

Evidence from retailers and manufacturers

4.9 The CMA explored the issue of special offers with the retailers identified at

Annex A. In particular the CMA:

(a) asked retailers to explain the nature and extent of their promotional

activity and how this had changed over time, and sought views on the

factors that influence which types of promotions and price frames are

used and when;

(b) requested copies of key internal compliance and training materials, to

observe how retailers had interpreted the relevant legislation and

guidance in this area;

approaches to in store pricing and promotional activity and to ask

questions of front-line staff; and

For example, Which? Conversation.

Which? (June 2015), Special offer… Save Nothing.

In relation to a higher reference price being a retailer’s most recent price available for at least 28 days and the

application of a 1:1 ratio between the period that the higher and lower prices apply.

(d) sought views from retailers in relation to the existing regulatory landscape,

in particular as regards the clarity and usability of the existing guidance

and the role of TSS and primary authorities.

4.10 The CMA also invited views from the manufacturers identified at Annex A in

relation to many of the same issues as those explored with retailers, in

particular to the extent that manufacturers support or fund particular

promotional activity by retailers and adopt similar mechanisms to ensure

compliance with the CPRs.

Evidence from TSS and primary authorities

4.11 The CMA asked TSOs and primary authority officers about their experiences

of enforcing compliance with the CPRs in relation to the promotional practices

identified by Which?. We also sought views more generally on the existing

legislation, guidance and the overall approach to compliance, monitoring and

enforcement activity in relation to grocery pricing and promotions.

Data

4.12 To provide us with a broader view of the prevalence of particular types of

promotions and price frames, validate our findings from our discussions with

retailers about their promotional practices and allow us to look in more detail

at the specific issues identified by Which?, we commissioned data from

mySupermarket.

4.13 We asked mySupermarket to provide data on all reference price promotions,

volume promotions and products with multiple pack sizes across five retailers

(Asda, Tesco, Sainsbury’s, Waitrose and Ocado

) on a single day (7

November 2014

) in 2014.

The CMA also asked mySupermarket to provide

information on prices and promotions for the products identified in this initial

MySupermarket is a price comparison website which allows consumers to compare prices of grocery products

across grocery and non-grocery retailers. MySupermarket collects information about the products, prices and

promotions available from the retailers’ websites (not in store) on a regular basis (usually daily).

The CMA understands that these five retailers have mature online shopping operations and stock a consistent

set of their products online. In contrast the CMA did not analyse the data obtained in relation to Aldi because it

does not offer online shopping and data are collected less frequently (twice a week). The CMA also did not

analyse the data obtained in relation to Morrisons because it has only recently launched online shopping and

appears to list a smaller set of its product range online. It was therefore considered that the data for Aldi and

Morrisons were not reflective of their full range of in store prices and promotions.

This particular date was chosen on the basis that it was unlikely to be disproportionately affected by seasonal

promotions and could be viewed as a representative day at each of the retailers.

The analysis included the full online product ranges available at these retailers with the exception of reference

price promotions and volume promotions in mySupermarket’s Adult Drinks and Mixers product category. This is

because the Alcohol etc. Act (2010) prohibits the use of volume promotions on alcohol in Scotland. As a result, a

retailer will often use different prices and promotions in different stores for products in the Adult Drinks and

Mixers category. This complicates the task of identifying a pricing history for these products and any subsequent

analysis.

sample for periods before and after the promotions in place on 7 November

2014.

4.14 Within the statutory timeframe of the super-complaint the CMA has conducted

an initial analysis of this data to assess the prevalence of:

 reference price promotions where the higher ‘was’ price was established

for less than 28 days (the ‘28 day indicator’ set out in the PPG);

 reference price promotions where the higher ‘was’ price was available for

less time than the lower ‘now’ price during the promotional period (the

‘1:1 ratio’ set out in the OFT Principles);

 volume promotions where the price per item under the volume promotion

is higher than the price per item before the volume promotion (for

example, where a product is priced at £1 before a volume promotion and

then ‘one for £1.50 or two for £2’ during the volume promotion); and

 larger pack sizes of a product having a higher unit price than smaller pack

sizes of the same product.

4.15 We are mindful of the limitations of data alone in demonstrating whether

particular practices are misleading under the law and that it is not appropriate

solely to use indicators in guidance (such as the ‘28 day indicator’ for price

establishment under the PPG or the ‘1:1 ratio’ under the OFT Principles) to

establish compliance or non-compliance with the CPRs. Rather, any

assessment of the compliance by traders with the CPRs can only be

undertaken with reference to the requirements of the legislation, the

established precedent and guidance and the specific circumstances of any

promotion. Nevertheless, these indicators are helpful in highlighting potential

issues and they are used by retailers as part of their processes to ensure

compliance.

4.16 Further, the fact that pricing data was more readily available for five retailers

in particular should not be taken to support any conclusion that these five

retailers are more or less compliant with the CPRs than any other retailer, or

that the CMA’s recommendations are limited in scope to these retailers in

particular. In certain tables the CMA has anonymised the retailers’ names so it

is not possible to identify them in relation to the data provided by

mySupermarket. The CMA has done this because the analysis of this data is

only intended to provide a snapshot of the pricing practices of the specified

retailers on 7 November 2014. Given the limited nature of this data, the CMA

would not consider it appropriate to specify the parties to whom the

information relates as this risks creating an inaccurate implication that any

particular supermarket is not complying with the legislation.

Complaints data

4.17 The CMA additionally gathered information from retailers, enforcers and

consumer organisations to identify which types of promotions generate

consumer complaints. Retailers informed the CMA that they occasionally

receive complaints from consumers, both in store and via social media or

email, about the issues raised by Which?. Primary authority officers, TSOs

and the ASA informed the CMA that they rarely receive complaints about the

promotions highlighted by Which?.

4.18 The CMA reviewed the databases held by Citizens Advice, TSS and the ASA,

and found several relevant records of consumers reporting concerns about

promotions to Citizens Advice and TSS. The issues covered included

instances of discounted products that consumers did not recall being labelled

at a higher price, multi-buy promotions and meal deals that were more

expensive than purchasing the individual products separately, and packs

marked as ‘bigger size’, ‘big saver’ or ‘extra free’ that were more expensive

than smaller packs of the same product. The CMA also used digital

engagement tools to search for relevant comments made via social media,

and similarly saw several remarks regarding multi-buy promotions, meal deals

and ‘big family packs’.

4.19 We note that the level of consumer complaints is unlikely to be a reliable

indicator of whether promotions are more likely to mislead consumers and

cause them detriment. The sentencing remarks from the Tesco strawberries

case

highlight that consumers may not be aware of misleading practices

and, even if they are, may not complain about them. For example, we

recognise that it would be rare for consumers to track price changes over time

and notice how long higher prices have applied for.

Consumer surveys

4.20 Which? submitted to the CMA the results of the following surveys on pricing to

illustrate how promotions may influence consumers’ purchasing behaviour:

 In June 2013, Populus surveyed 2,028 British adults and found that 55%

of people thought that multi-buy promotions often lead them to buy more

food than they needed, and 40% said that they consequently wasted food.

Discussed in paragraph 3.20

 In March 2015, Populus surveyed 2,075 UK adults and found that of the

68% of people who purchased products on promotion, 69% said it is

difficult to work out whether they were actually a good deal, 38% said they

trusted that promotions represented good value and 17% responded that

they had purchased a product they did not need.

4.21 The Consumer Council for Northern Ireland (CCNI) provided details of a

survey it had conducted in 2012. It commissioned Ipsos MORI to conduct face

to face surveys of 1,016 households in Northern Ireland (19 March 2012 to

6 April 2012).

It reported that 43% of consumers seek ‘buy-one-get-one-free’

(BOGOF) promotions, but 35% want more promotions on individual products

and 45% want essential items reduced more frequently. Further, 22% of

respondents said that promotions encourage them to buy more than they

need.

4.22 Both Which? and CCNI have highlighted the potential for consumer detriment

in circumstances where consumers perceive that promotions help them make

the most of their budget, but where the promotions in question do not afford

consumers a real saving. They emphasise that consumers will only benefit

when promotions are fair and transparent.

Economic framework

4.23 As part of our economic assessment of the promotional practices raised by

Which? in the super-complaint, we have sought to understand the role of price

frames and promotions in driving price competition between retailers and the

circumstances in which particular price frames and promotions have the

potential to lead to consumer detriment.

4.24 When promotions and price frames are genuine, they can provide significant

benefits to consumers. In particular, promotions and price frames can

efficiently signal a genuine discount to consumers, helping to drive price

competition. Promotions and price frames may be a particularly simple and

efficient way of doing this, especially in complex shopping environments in

which consumers are more reliant on decision making short-cuts.

4.25 However, when promotions and price frames are misleading they can lead to

consumer detriment. The CMA has considered the following broad theories of

harm that explain how, in general, consumer detriment may arise due to the

use of promotions and price frames:

The Consumer Council for Northern Ireland (January 2013), Hard to Stomach: The impact of rising food costs

for Northern Ireland consumers, pp28-29.

 Inflating consumer willingness to pay for a product by suggesting that a

promotion is better than it really is.

 Decreasing the perceived benefits of further consumer search by

suggesting that a promotion is better than it really is.

 Increasing the costs consumers face when comparing products and

searching for the best deal.

4.26 Under the first theory of harm, consumers may focus on a reference price and

assume that it reflects the value of the product. If that reference price is

misleading, perhaps because it does not reflect a genuine previous selling

price, then consumers may be willing to pay more for the product than they

otherwise would. This may lead consumers to purchase the product at a

higher price than they would have done otherwise or to purchase the product

when they would not have done so at all.

4.27 Under the second theory of harm, consumers may interpret a reference price

as an indication of the prevailing price for that product elsewhere in the

market, leading them to overestimate the prices available at other retailers

and underestimate the value of searching further.

If consumers are more

reluctant to shop around and to compare prices across retailers, then there is

less incentive for retailers to reduce prices to attract customers. This may lead

consumers to face higher prices than they would otherwise.

4.28 The third theory of harm relates to the effects that promotions and price

frames have on the search costs consumers face when shopping and

comparing products. These costs include the time required to compare and

evaluate the relative value of alternative products within a store using the

information on the products and the shelf edge labels. Promotions and price

frames may increase the complexity of a consumer’s decision, either posing

an additional burden on consumers to work out the best value for them or

making it more likely that they will make mistakes or not consider which

product provides best value. As with the second theory of harm, this may

soften price competition between retailers by reducing the willingness of

consumers to shop around and to compare prices across retailers, resulting in

consumers paying higher prices than they otherwise would.

4.29 These issues may be particularly significant if multiple price frames are used

in combination or there is a wide product range to choose from. A large

number of promotions and price frames used simultaneously will increase the

complexity of the consumer’s decision, imposing an additional burden on

consumers and making it more likely that they will rely on simple rules and

short cuts (such as interpreting the reference price as the value of the product

or the price charged by other retailers) when making choices.

4.30 When promotions and price frames are genuine consumers will benefit. When

they are misleading, and consumers cannot easily distinguish between

genuine and misleading promotions, they can lead to consumer detriment.

Consumers cannot easily distinguish between genuine and misleading

promotions and this creates the potential for consumer detriment. It is

therefore necessary to consider the specific characteristics of a promotion or

price frame in order to assess whether it is genuine or misleading.

4.31 Economic research suggests that each type of promotion and price frame can

have significant effects on consumer behaviour (see Annex C for further

details on this literature), although there is no evidence that any general type

of promotion is systematically misleading or detrimental for consumers. In

addition, in the focus groups

commissioned by the CMA, many of the

participants said they select products quickly without calculating whether they

actually provide best value and that they were likely to buy products on

promotion that they had not planned to purchase. Participants also said that

they recognised that promotions did not necessarily offer the best value, and

that they preferred promotions that were easier to understand.

Legal framework

4.32 The CPRs prohibit traders from engaging in commercial practices that,

through action or omission, mislead (or are likely to mislead) the average

consumer into taking a transactional decision they would not have taken

otherwise. Further details of the key provisions of the CPRs are set out in

Annex B. We have considered in particular in this context whether certain

types of promotions or price frames could amount to a misleading action for

the purposes of regulation 5 of the CPRs or a misleading omission for the

purposes of regulation 6 of the CPRs.

4.33 The PPG and the OFT Principles provide guidance to retailers on the pricing

practices that are more likely to be compatible with the CPRs. Again, further

detail is provided in relation to this guidance, and particularly its status against

the background of the relevant EU and national legislation, in Annex B.

Details of this work are set out at Annex F.

Evidence and analysis

4.34 The CMA has first considered the types of promotions and price frames used

by retailers in the grocery market, as well as the key drivers of particular

promotions and pricing practices.

4.35 The CMA has then sought to ascertain the broad prevalence of the concerns

raised by Which?. We have drawn on the analysis of the data obtained from

mySupermarket, but have also considered the information provided by

Which? and the evidence gathered directly from retailers and manufacturers.

We have considered whether the practices highlighted are compatible with the

applicable legislation and/or have the potential to lead to consumer detriment.

4.36 The CMA has also assessed the views expressed by retailers, consumer

bodies and enforcers in relation to the existing regulatory landscape, including

the applicable legislation and guidance, and regimes for compliance,

monitoring and enforcement.

4.37 Finally, the CMA has considered whether any change is needed to address

specific issues that we have encountered through our investigation, and, if so,

what actions may be appropriate.

Prevalence and drivers of different types of promotions and price frames

Broad prevalence of promotions and price frames

4.38 The CMA considered market reports assessing the extent of promotional

activity in the grocery market and other observable trends. According to

Kantar Worldpanel, promotions account for around 40% of retail grocery

market expenditure in the UK.

In 2013/2014, the most common type of

promotion was a temporary price reduction,

which includes reference

pricing, followed by volume promotions such as multi-buy promotions. Kantar

Worldpanel estimates that temporary price reductions account for between

28% and 35% of turnover and that volume promotions account for between

15% and 17% of turnover at the four largest retailers.

4.39 Retailers’ use of price frames and particular promotions varied considerably,

depending on the size of the retailer, its position in the market, its split of

branded and own-brand products, and the profile of its customer base.

Kantar Worldpanel data for the year ending 1 March 2015.

A temporary price reduction is identified from the sales value and sales volume data of a product and occurs

when the average price of the product drops from a higher price for a short period of time before increasing

again.

Kantar Worldpanel data for the year ending 29 March 2015.

Promotions are less prevalent at Aldi and Lidl than at the four largest retailers

(Tesco, Asda, Sainsbury’s and Morrisons). Across the range of retailers we

engaged with, we were informed that approximately 10% to 40% of their

products are involved in promotions at any one time. Some of the larger

retailers use a wide range of different types of promotions while others use a

much more limited range.

4.40 Several retailers and manufacturers referred to avoiding complex promotions

and simplifying their product ranges. One manufacturer mentioned a growth in

price reductions instead of multi-buy promotions due to changed shopping

approaches following the recession. Almost all retailers referred to a trend

towards ‘round pound’ pricing

and everyday low pricing (EDLP).

The

extent of promotional activity also varies considerably depending on the

product category. For example, product categories characterised by impulse

purchases, such as canned cola and chocolate biscuits, are frequently sold on

promotion (approximately 73% and 60% of the time respectively), whereas

other categories of product, such as long-life pizza bases and powdered

instant milk, are rarely sold on promotion (approximately 4% and 6% of the

time respectively).

The drivers of different types of promotions and price frames

4.41 The CMA sought views from retailers and manufacturers as to the factors that

influence which types of promotions and price frames are used and when.

4.42 All of the larger retailers determine prices and promotions centrally, and (as

noted above) these are then generally rolled out across all stores and online

(although there may be exceptions for smaller stores such as convenience

stores and petrol stations). Therefore individual stores have no discretion to

independently engage in promotional activity (other than to reduce perishable

products to clear).

4.43 We also spoke with some of the larger chains of independent stores, and to

wholesalers that plan and negotiate promotions on behalf of independent

stores across the country or in a particular region. Those stores are free to

decide whether or not to opt in to particular promotions and generally have

discretion to run additional local promotions over and above any centrally

planned promotions. We observed greater use of manufacturer price marked

Brand View, Round Pound Promotions.

Mintel (November 2014) Supermarkets: More Than Just Food Retailing – UK, November 2014, pp187, 188,

207, 212, and 220.

Kantar Worldpanel data for the year ending 29 March 2015.

packs in convenience stores, some of which also included a price frame

(including reference prices and volume promotions).

4.44 Many of the retailers we spoke with plan their promotional activity up to a year

in advance, dividing the calendar year into three to four week promotional

periods, frequently based on seasonal themes. The retailers’ buying teams

then negotiate with manufacturers and suppliers to offer customers particular

promotions within those periods.

4.45 The CMA was informed by retailers and manufacturers that manufacturers

similarly prepare annual promotional plans, in particular across major branded

products, and propose funding and other support for promotions. They then

engage in negotiations with retailers’ buyers to reach agreement on an

appropriate type of promotion to give prominence to their brand and drive

sales volume.

4.46 Some retailers informed the CMA that promotions on branded products are

driven to a great extent by manufacturers due to the funding support that they

provide and the bargaining power held by the manufacturers of the top

brands. Both retailers and manufacturers emphasised to the CMA that

retailers make the final decision about the retail price of products, the type of

promotion ultimately run and how it is communicated to consumers.

4.47 As far as the choice of a particular type of promotion is concerned, retailers

again emphasised the trend towards ‘round pound’ pricing and EDLP.

However, the particular type of promotion chosen is informed by a wide range

of factors, including: sale and pricing history, customer feedback, offering

value, promoting specific brands, the product category, the availability of

stock, the season, and their specific approach to branding and theming

promotions and to customer service.

4.48 The CMA’s discussions with retailers and manufacturers highlighted the

extent to which promotional activity frequently strikes a balance between a

retailer’s desire to deliver a compelling range of promotions to highlight good

value to consumers, and manufacturers’ more specific aims to drive sales of

particular branded products at key periods.

Analysis of different types of promotions and price frames

4.49 In this section, we set out our more detailed analysis of the particular

promotions and price frames highlighted by Which?. We have drawn on our

discussions with retailers and manufacturers and the evidence that they

provided to us in relation to the operation of different promotions and price

frames. We have also used the mySupermarket data described at paragraphs

4.12 to 4.16 above, where appropriate, to draw findings about the way in

which these promotions and price frames appear to be operated in practice by

the five retailers considered within that data. We have also taken into account,

so far as is relevant, the incidence of consumer complaints in relation to these

issues, relevant survey evidence, and views of TSOs and primary authority

officers.

4.50 In analysing the different types of promotions and price frames and whether

they give rise to concern, we have been guided by the requirements of the

CPRs, in relation to whether they have the potential to be misleading.

Reference price promotions

Summary of evidence

4.51 Our discussions with retailers and manufacturers and our review of retailers’

internal guidance and compliance material generally revealed a good

understanding of the principles underpinning the CPRs in relation to reference

pricing. Retailers were generally alive to the need to ensure that the higher

prices used in reference price promotions are genuine and referred, as

appropriate, to the PPG and/or the OFT Principles in their internal procedures.

Among the retailers there are a number of automatic or manual systems in

place to check reference price promotions before they are loaded into their

systems. These typically validate proposed promotions against the retailer’s

internal guidance and procedures and flag, for further management attention,

any which would fall outside their requirements. However, there was a

divergence in approach in relation to the length of time a higher price would

need to be charged in order for it to be referred to in a promotion (for ease we

refer to this as the ‘price establishment period’). This was also evident from

our review of the data below.

4.52 As we noted at paragraphs 4.12 to 4.16 above, the CMA has used data

supplied by mySupermarket to analyse a sample of reference price

promotions at five retailers (further details of our analysis of the data are set

out at Annex D). The CMA has analysed data on all of the reference price

promotions available at these retailers on 7 November 2014. Table 4.1 below

sets out the percentage of all products at each of these retailers that were

included in a reference price promotion on that day.

Table 4.1: Percentage of products at each retailer that were included in a reference price

promotion (excluding alcoholic products) on 7 November 2014

Retailer

Asda

Ocado

Sainsbury’s

Tesco

Waitrose

Percentage of all products in

reference price promotions

(excluding alcoholic

products)

Source: CMA analysis of data supplied by mySupermarket.

4.53 The CMA has then considered the data in relation to these particular

reference price promotions to assess whether the higher reference price was

charged for at least 28 days before the promotion (the ‘28 day indicator’) and

whether the product was available at the higher reference price for at least as

long as it was available at the lower price during the reference price promotion

(the ‘1:1 ratio’).

4.54 The ‘28 day indicator’ and the ‘1:1 ratio’ are set out in the PPG and the OFT

Principles respectively. As we note at paragraph 4.15 above, the indicators

set out in the PPG and the OFT Principles are just that. They can only provide

an initial indication of practices that are more or less likely to comply with the

CPRs. Promotions that fail the 28 day and 1:1 ratio indicators can still comply

with the CPRs, and promotions that satisfy those indicators can equally, in

some circumstances, fail to comply with the CPRs. A broader view is required,

in the round, to determine whether a practice has the potential to mislead,

including consideration of the information given to consumers and the extent

to which they are able (or not) to discern the genuine reference price. The

underlying principle in both the PPG and the OFT Principles is that a

reference price used to make a comparison with a promotional price should

represent a genuine retail price and that the reference price should not be

used where the promotional price has applied for so long that it becomes the

true price of the product.

4.55 In its initial analysis the CMA has used the data to assess the extent to which

the reference price promotions in the sample satisfied the ‘1:1 ratio’.

This is

consistent with the approach taken in the OFT’s Principles which stated that

‘where this 1:1 ratio is not exceeded, the OFT is unlikely to be concerned with

the length of time which the higher price was initially charged’. The CMA has

then used the ‘28 day indicator’ when further analysing those reference price

promotions which did not satisfy the ‘1:1 ratio’.

Throughout its analysis the CMA incorporated a margin of error and allowed for 3 days leeway from both the

‘1:1 ratio’ and the ’28 day indicator’. This is explained in more detail in Annex D.

4.56 The limitations of the data set meant that some reference price promotions

could not be analysed at all or further information would be required before it

would be clear whether the reference price promotion satisfied the ‘1:1 ratio’.

The reasons for these limitations and their implications are discussed in detail

in Annex D and the CMA has accounted for these limitations when analysing

the data and interpreting the results. These limitations meant that the CMA

could not clearly analyse whether a reference price promotion satisfied the

‘1:1 ratio’ in between 6% and 45% of the promotions for each retailer.

4.57 Table 4.2 summarises the results of the CMA’s initial analysis.

Table 4.2: Characteristics of reference price offers analysed by the CMA (% of all reference

price promotions available at each retailer on 7 November 2014)

Retailer

Satisfies the

‘1:1 ratio’

Does not satisfy

the ‘1:1 ratio’

Further data

required

Not

analysed

Source: CMA analysis of data supplied by mySupermarket.

4.58 Where the data did provide a clear indication of whether the ‘1:1 ratio’ had

been satisfied, there was generally a low incidence with which reference price

promotions in the sample did not satisfy the ‘1:1 ratio’. However, there was

one retailer for which this proportion was much larger. For this retailer 21% of

the reference price promotions in the sample did not satisfy the ‘1:1 ratio’.

This equated to 37% of the reference price promotions where the CMA could

clearly analyse whether the reference price promotion satisfied the ‘1:1 ratio’.

For the other four retailers 5% or less of the reference price promotions in the

sample did not satisfy the ‘1:1 ratio’. For each of these retailers this equated

to 6% or less of the reference price promotions where the CMA could clearly

analyse whether the reference price promotion satisfied the ‘1:1 ratio’. Overall,

across the five retailers 8% of the reference price promotions we analysed did

not satisfy the ‘1:1 ratio’. This represents 0.5% of the products available at the

retailers analysed.

4.59 The CMA has analysed the data in more detail to understand the

circumstances in which the data might suggest that a reference price

promotion did not satisfy the ‘1:1 ratio’. The CMA has focussed on the

following circumstances which account for a significant fraction of the

reference price promotions where the ‘1:1 ratio’ is not satisfied:

(a) Neither the ‘1:1 ratio’ or the ‘28 day indicator’ are satisfied – The

previous, higher reference price was not charged for 28 days prior to the

commencement of the promotion and the subsequent, lower price was

available for longer during the promotion than the previous higher

reference price.

(b) The ‘28 day indicator’ is satisfied but the ‘1:1 ratio’ is not – The

previous higher reference price was charged for 28 days prior to the

commencement of the promotion but the subsequent, lower price was

available for longer during the promotion than the previous, higher

reference price.

frame was added to the product two or more weeks after the product’s

price had been reduced. For example, the product was priced at £11

before the price was cut to £9 with no price frame being applied and then

2 or more weeks later a ‘Was £11, Now £9’ price frame was added.

4.60 Table 4.3 summarises the results of this analysis.

Table 4.3: Circumstances in which reference price promotions did not meet the ‘1:1 ratio’ (as a

percentage of all reference price promotions available on 7 November 2014)

Retailer

Neither ‘28 day

indicator’ nor ‘1:1

ratio’ are satisfied

The ‘28 day

indicator’ is met but

the ‘1:1 ratio’ is not

Price frame

added at least

2 weeks later

Other*

2.5

0.8

0.1

1.3

0.1

0.6

0.0

0.5

0.0

12.4

6.7

1.5

1.3

0.7

0.0

2.1

0.2

0.0

0.3

Source: CMA analysis of data supplied by mySupermarket.

*The ‘Other’ category covers a range of circumstances including some cases where one would expect little consumer detriment

to arise. For example, this category includes cases where the data suggests that a retailer could have referenced a higher price

than that used in the reference price promotion. This and the other circumstances covered in this category are discussed in

more detail in Annex D.

4.61 Table 4.3 shows that in only a minority of the promotions analysed by the

CMA was neither the ‘28 day indicator’ or the ‘1:1 ratio’ satisfied (at most

2.5% of reference price promotions and less than 1% of reference price

promotions at three retailers).

4.62 However, the analysis highlights instances in which the ‘28 day indicator’ is

met but the ‘1:1 ratio’ is not. At one retailer this related to 12.4% of the

reference price promotions in the sample (22.6% of the reference price

promotions where the CMA could clearly analyse whether the reference price

promotion satisfied the ‘1:1 ratio’).

4.63 Further, when a promotion ran for longer than the higher reference price had

been charged (ie the ‘1:1 ratio’ was not satisfied), this difference was often

significant. For the retailer concerned the length of the reference price

promotion exceeded the length of time for which the higher price was charged

by an average of 37 days

and the largest difference was 73 days. This is in

contrast to the average length of a reference price promotion in the sample of

31 days (50 days for the retailer concerned). The analysis also highlights that

there are occasions where a price frame is added after the price of the

product has already been lowered for a period (at least two weeks). This

amounted to 6.7% of the reference price promotions in the CMA’s sample at

one retailer.

Findings

4.64 From the information we have gathered and the analysis of the data set out

above, we have identified certain practices which, in the CMA’s view, have the

potential to be misleading and, if so, may breach the requirements of the

CPRs. These relate to the particular issue of ensuring a reference price is a

genuine selling price and a fair basis for comparison for any promotions that

refer to it.

4.65 The primary area of concern relates to promotional periods that

significantly outlast the period of price establishment. From our

discussions with retailers and our review of their internal guidance and

procedures, we identified promotional periods lasting for significantly longer

than the product was on sale at the reference price. This is also apparent in

the data analysed by the CMA, as shown in Table 4.3.

4.66 We bear in mind in this context the sentencing remarks from the Tesco

strawberries case (see paragraph 3.20 above and Annex B) and we consider

that it is questionable whether the higher price could be properly

characterised as the ‘normal’ selling price of the product where the

promotional period so significantly outlasts the price establishment period. In

these circumstances, there is a question about whether the higher price is a

genuine one, and it might also be argued that, after a certain point, the

promotional price itself becomes the ‘normal’ price of the product. While low

prices for sustained periods are generally to be welcomed, it could be

misleading to continue to reference the higher price throughout such

sustained periods.

4.67 The CMA will therefore take further action with the businesses concerned to

address these issues and secure any changes necessary to ensure

consumers are not misled.

The average across all retailers was 30 days.

There is a connected issue in relation to manufacturer price marked packs which include a reference price

frame. We observed the use of such packs in convenience stores. Manufacturers and retailers alike should

ensure that their use does not lead to a breach of the CPRs.

4.68 In addition, there are certain other practices relating to reference price

promotions which have the potential to be misleading. The CMA wants to

understand the issues further to assess their significance and potential to

mislead. Again, the CMA will follow up with retailers to explore these issues in

more detail. They are also areas where clearer guidance as to the application

of the legislation would help ensure compliance.

4.69 The first such practice relates to the use of reference price frames after the

price of the product has already been lowered for a period – Table 4.3

highlights occasions where a higher reference price frame is used after the

product has already been presented at the lower price for a significant period

of time. In these circumstances it could be argued that the reference price is

no longer genuine and no longer provides a relevant or meaningful basis for

comparison. This was an issue already addressed to some extent by retailers

in their internal systems, guidance and compliance materials, but we will raise

the issue directly with the retailers concerned.

4.70 In addition, the data highlighted isolated instances

where a reference price

was used as the basis of two promotions, but where the second promotion

afforded a less generous discount than the first (for example, a ‘was £9, now

half price’ promotion was followed immediately by a ‘was £9, now 1/3 off’

promotion). Such a practice can lead to a lengthy overall promotional period,

and appears to give no consideration to whether the price in the first

promotional period has become the established price of the product.

4.71 Our investigation highlighted a further issue, relating to reference prices that

are established during a volume promotion. Our review of evidence from

retailers, and our initial analysis of the mySupermarket data, highlight that

certain retailers take different views about whether the reference price of an

individual product can or should be established while that product is involved

in a volume promotion. Table 4.4 below sets out the frequency with which this

occurs for the retailers analysed.

Table 4.4: Percentage of reference price offers where the higher reference price was charged

during a volume promotion

Retailer

Percentage of

reference price

promotions*

At this retailer this amounted to 0.4% of the reference price promotions in the sample. See Annex D for details.

Source: CMA analysis of data supplied by mySupermarket.

*As a percentage of all reference price promotions available at that retailer.

4.72 We are aware from this data and from other evidence that, certain retailers

take the view that reference prices should not be established by reference to

the price of a product during the lifetime of a volume promotion, whilst others

take the view that this is permitted. Indeed the data above shows that it is a

relatively frequent occurrence for certain retailers.

4.73 Finally, we have also been told about a number of other aspects of reference

price promotions in relation to which the application of the CPRs could

usefully be clarified. These include:

 the use of frequent promotions where certain products are promoted on

near constant sequences of high/low pricing;

 the use of an out-of-season reference price for seasonal products;

and

 the approach to how widespread any reference price needs to be

established across a retailer’s stores and across geographical areas to be

considered genuine.

4.74 In relation to the issues set out in paragraphs 4.69 to 4.73, our discussions

with retailers about their approach and the data analysis above shows that

there are a range of issues relevant to whether or not a reference price is

likely to be a fair and genuine basis for comparison. Where they have the

potential to mislead consumers, these could be issues that could breach the

CPRs. As noted, we will engage with retailers further on these points to

understand their prevalence and impact.

4.75 In addition, the CMA considers there is more that can be done through clearer

guidance. The current version of the PPG is silent on certain aspects of these

types of promotional practices. We therefore consider that it would be

beneficial for the revised PPG to address these issues and recommend that

CTSI considers this further in the context of the review of the PPG.

Volume promotions

4.76 In its super-complaint, Which? refers to certain retailers increasing the price

per item of a product when the product is included in a volume

Reference price promotions can apply in relation to seasonal goods. We have not analysed particular

reference price promotions to assess whether the higher reference price was ‘established’ out of season. The

principles that apply to reference price promotions equally apply to seasonal promotions. Where the higher price

is established out of season the relevant question is whether the price is genuine, taking account of all of the

relevant circumstances, including the time of year that the product is supplied and purchased.

promotion. The CMA has assessed how frequently this occurs by reference

to the sample of volume promotions provided by mySupermarket.

4.77 As with reference price promotions, we used mySupermarket data to

ascertain how many volume promotions were in place at each of the five

retailers on 7 November 2014, between 13% and 18% of all products at each

of the retailers analysed.

Table 4.5: Percentage of products at each retailer that were included in a volume promotions

on 7 November 2014

Retailer

Asda

Ocado

Sainsbury’s

Tesco

Waitrose

Percentage of all

products in volume

promotions

Source: CMA analysis of data supplied by mySupermarket.

4.78 Table 4.6 summarises the results of the CMA’s initial analysis of the volume

promotions in the sample on 7 November 2014.

Table 4.6: Summary of the characteristics of volume promotions as a percentage of all volume

promotions available on 7 November 2014

Price per item under the volume promotion:

Retailer

Change in the

structure of a

volume

promotion

not higher than

the previous

selling price

higher than

selling price

between the higher reference

and the lower selling price in a

previous reference price

promotion

Not

analysed

9.1

33.4

0.4

5.9

51.3

25.5

48.9

0.5

10.7

14.4

10.0

17.0

5.3

4.5

63.1

11.0

35.8

0.2

12.1

41.0

28.0

38.9

1.2

6.5

25.2

Source: CMA analysis of data supplied by mySupermarket.

Notes

1. So the volume promotion occurring on 7 November 2014 followed another volume promotion. For example, a ‘3 for 2’

promotion was followed by a ‘5 for £3’ promotion. In these cases a retailer has changed the pricing structure within a volume

promotion, rather than moving from a single selling price to a volume promotion.

2. Immediately prior to the volume promotion the product was involved in a reference price promotion. Additionally, the price per

item under the volume promotion was higher than the price under the reference price promotion but lower than the reference

price. For example, the product was involved in a reference price promotion of ‘Was £2.75, Now £1.50’ prior to a volume

promotion of ‘1 for £2.50 or 2 for £4’.

4.79 As is discussed in detail in Annex D, limitations in the data available to the

CMA meant that between 14% and 63% of the volume promotions at each

retailer could not be analysed because the data did not provide clarity as to

the previous selling price. The CMA will continue to analyse the data and seek

to establish whether there are any issues or practices that merit further

investigation. The CMA is mindful that, as for reference price promotions, data

alone can only tell us so much about whether retailers are complying with the

CPRs. In particular, the broader circumstances of the volume promotions in

question (notably the information communicated to the consumer) would need

to be considered.

4.80 Where the CMA was able to analyse the volume promotions, for four of the

five retailers less than 1.2% of the volume promotions in the sample had a

higher price per item under the volume promotion than the previous selling

price. For these retailers this equated to less than 2% of the volume

promotions the CMA was able to analyse. For the final retailer the figure was

somewhat higher at 5.3% of the volume promotions in the sample (16% of the

volume promotions the CMA was able to analyse at this retailer). Overall

across the five retailers 3% of the volume promotions we analysed had a

higher price per item under the volume promotion than the previous selling

price. This represents 0.3% of the products available at the retailers analysed.

4.81 The CMA considers that many of the same issues that arise in relation to

reference price promotions can also arise in relation to volume promotions. In

particular, where a volume promotion presents a particular saving to a

consumer based on the purchase of multiple items, the consumer will take the

price of an individual item as the benchmark for any saving. If the price of the

individual item is artificially inflated, this could mislead the consumer as to the

genuine price of the product in question. As with the concerns described

above relating to reference price promotions, we will take further action with

the businesses concerned to address these issues.

4.82 Which? highlights a concern in relation to long-term volume promotions and

the extent to which these are misleading.

We would not necessarily agree

with Which? that a long-term volume promotion (which appears to be common

in a number of retailers for a number of household ‘staples’ such as milk, juice

and cheese and for ‘meal deals’)

in and of itself has the potential to mislead

consumers. However, as we explore further from paragraph 4.95 onwards

below, there can be circumstances in which it may be misleading to suggest,

through a short promotional end date, that a promotion is due to end when

that promotion will in fact continue indefinitely.

Larger pack sizes with a higher unit price

4.83 To understand how often larger packs represented worse value for

consumers than purchasing several individual smaller packs, we again

Which?’s analysis provided to the CMA on 12 June 2015 highlighted that 59 of the 235 products considered by

Which? (25% of the total) were included in a multi-buy promotion for more than three of the six months analysed.

In the data analysed by the CMA 48% of the volume promotions lasted for at least 60 days and 34% lasted for

at least 90 days.

gathered data from mySupermarket. Here, we considered all the products

(SKUs

) on sale on 7 November 2014 that had a smaller pack size variant,

with a view to comparing the unit prices of each variant and establishing how

frequently larger pack sizes had higher or lower unit prices than the smaller

pack size.

4.84 Table 4.7 below summarises the data provided to the CMA. This table shows,

for each retailer, the number of SKUs where there was at least one other SKU

that was a smaller pack size of the same product and occasions where an

SKU had more than one smaller pack size.

Table 4.7: Summary statistics for different pack size analysis

Retailer

Number

of SKUs

Number

unused

Number

analysed

Number of SKUs analysed with:

1 smaller

2 smaller

3 smaller

4+ smaller

Asda

2,281

2,279

1,883

331

Ocado

1,923

1,921

1,604

273

Sainsbury's

2,106

2,097

1,753

283

Tesco

3,208

3,202

2,556

503

107

Waitrose

1,192

1,005

164

Source: CMA analysis of data supplied by mySupermarket.

Notes:

1. The figures in this table relate to individual SKUs rather than individual product lines. For example, suppose that a single

product comes in pack sizes of 2 units, 4 units, 9 units and 16 units (ie four different SKUs). This product would have three

SKUs listed in the data: the 16 unit pack (which has three smaller SKUs), the 9 unit pack (which has two smaller SKUs) and the

4 unit pack (which has one smaller SKU).

4.85 As this table shows, the majority of SKUs had only one other SKU which was

a smaller size of the same product (82% of all SKUs) and most of the others

only had two smaller SKUs. A small number of SKUs (19 in total) were

excluded from the analysis because the pricing and promotional data provided

by mySupermarket for those SKUs was inconsistent.

4.86 First, the CMA analysed the frequency with which a smaller sized SKU (the

smaller pack size) had a lower per unit price than a larger SKU (the larger

pack size). To identify instances where the unit price differences were

significant, the CMA also identified the frequency with which the unit price

difference was greater than 10%. Table 4.8 summarises the results of this

analysis.

SKU refers to a stock-keeping unit and each SKU denotes a uniquely identifiable product stocked by a retailer.

Therefore, different sizes of the same product will be identified as separate SKUs.

For example, the description of the promotion may say ‘Was £2.50, Now £2’ but all of the prices were recorded

as £2.50.

Table 4.8: Percentage of SKUs with at least one smaller sized SKU which is cheaper

Retailer

Percentage (of SKUs with

multiple sizes) with at least one

smaller pack which is cheaper

Any lower

price

Price lower by

10% or more

Source: CMA analysis of data supplied by mySupermarket.

4.87 As can be seen in Table 4.8 a significant proportion of the larger SKUs had at

least one smaller SKU which had a lower per unit price. For each of the

retailers the proportion of larger SKUs where at least one smaller SKU had a

lower per unit price was between 16% and 21%. In addition, the difference

between the unit prices for the smaller and larger SKUs was often significant.

For four of the retailers the proportion of the larger SKUs whose unit price was

at least 10% larger than the unit price of the smaller SKUs was between 11%

and 12% and for the other this proportion was nearly 16%.

4.88 The CMA then considered the extent to which the lower price on the smaller

pack size was due to a promotion that only applied to the smaller pack. This

analysis is shown in Table 4.9.

Table 4.9: Frequency with which a smaller SKU has a lower unit price due to a promotion

SKUs with at least one smaller

SKU which is cheaper

Due to a promotion on the

smaller pack only

Not due to a promotion only

on the smaller pack size

Any lower

price

Price lower by

10% or more

Any lower

price

Price lower by

10% or more

Any lower

price

Price lower by

10% or more

Source: CMA analysis of data supplied by mySupermarket.

Note: The percentages in this table may not equate due to rounding errors.

4.89 This analysis shows that, for four of the five retailers, in the majority of

instances where the unit price is lower for a smaller sized SKU this is due to a

promotion which only applies to the smaller sized SKU. However, for one

retailer the majority of instances where the unit price is lower for a smaller

pack size were not due to a promotion of the smaller pack size and, in over

half of these cases, the price difference was greater than 10%.

4.90 These figures should necessarily be treated with some caution as we do not

know from the data what information was presented to consumers in

connection with the different pack sizes and whether manufacturers or

retailers are steering consumers towards larger pack sizes, for example by

making claims on the product packaging or surrounding material implying that

the larger pack size represents the best value.

4.91 Within the constraints of the timeframe of this investigation, we were not able

to consider this question in detail. Retailers indicated to us that on-pack

advertising using ‘value’ and ‘free’ statements is decreasing. Some retailers

informed the CMA that they have asked their suppliers not to mark ‘bigger

pack better value’ or ‘best value’ on products, and other retailers avoid making

statements about ‘extra free, ‘value’ or ‘special’ on advertising materials.

Certain manufacturers informed the CMA that they no longer include non-

promotional value statements on their packaging.

4.92 The CMA understands that these changes have arisen in response to

consumer feedback that such statements are not transparent as to the true

value or price of the product. They may also be driven by a need to ensure

that retailers and manufacturers do not unlawfully describe a product as free

when it is not.

4.93 In the event that claims about the better value of certain packs were made

which were likely to be misleading under the CPRs, this would be a cause for

concern. Over the course of our investigation, we did not encounter particular

examples of such claims being made, over and above the material provided

by Which?. Provided misleading claims are not made about value on product

packaging, retailers are free to price larger pack sizes how they wish, even if

this leads to the counter-intuitive situation where the unit price of a larger pack

size is higher than smaller variants.

4.94 However, given the frequency with which our data revealed that larger pack

sizes do not represent better value than smaller pack sizes, there is clearly

scope to enhance consumer awareness of the issue. This is an area where

presentation of clear and consistent unit pricing has the potential to help

consumers compare pack sizes and decide which size represents better value

and we discuss this further below in Chapters 5 and 6.

Time limited promotions

4.95 Which?’s campaign material, provided in support of the super-complaint,

reports instances of the end date or order by date of volume promotions being

extended, or retailers including a short promotional period on a product

See Schedule 1 to the CPRs, paragraph 20 (in relation to describing a product as free when that is not true

and the consumer is required to pay); Commission’s Guidance on paragraph 20 of Annex 1 to the UPCD.

despite the promotion actually lasting for most of the year. This has the

potential to give consumers a false impression that the promotion is only

available for a short period of time, and thus encourages them to act to take

advantage of it.

4.96 Our review of the presentation of promotions in store and online revealed

different approaches by some retailers in relation to displaying end dates on

particular promotions. Our investigation highlighted a potential issue in

relation to displaying an ‘end date’ for continuous promotions. We found

some evidence to support Which?’s concerns on this issue. For example, we

observed from our in-store visits that certain retailers operating long term

volume promotions update the end date of the promotion on a monthly or

annual basis.

Some retailers’ compliance materials say promotional end

dates must not be extended and some specify when it is appropriate to state

an end date for long term volume promotions. Only three (of the seven)

retailers offering online grocery shopping provide ‘order by’ or ‘delivery by’

dates in relation to products on promotion.

4.97 The ASA recently found

that, in circumstances where the retailer intended a

promotion to end on a particular date, it was misleading not to state the end

date in a newspaper advertisement. The CMA agrees that there will be

situations where the end date of a promotion is material information that the

consumer needs and that falsely stating the end date, and then extending it,

or not stating it could have a detrimental impact on consumers’ purchasing

decisions.

In addition, there may be circumstances where including an end

date is itself misleading (in particular in connection with continuous

promotions) to the extent that it gives consumers the false impression that

they need to act promptly to take advantage of a promotion that will not be

available following the stated end date.

4.98 We would therefore recommend that the revised PPG provide clarity on when

and how promotional end dates should be communicated to consumers. At

the same time, CTSI could usefully give consideration to the specific

circumstances of online shopping where customers may not be charged the

price they were expecting if a promotion has ended between the date that the

products are ordered and the date they are delivered.

We observed a similar issue in relation to price marked packs in convenience stores, where retailers made

continued use of price marked packs with a volume promotion price frame (eg ‘2 for £3) but included an end date

on the promotion.

ASA Ruling on Wm Morrison Supermarkets plc.

Also see Schedule 1 to the CPRs, paragraph 5 (in relation to failure to disclose the existence of reasonable

grounds the trader may have for believing they will not be able to supply to products at the stated price).

Also see Schedule 1 to the CPRs, paragraph 7 (in relation to falsely stating a product will only be available, or

available on particular terms, for a very limited time).

The regulatory and enforcement landscape

The role of legislation and guidance

4.99 As part of our investigation into the issues raised by Which?, the CMA sought

views from retailers, manufacturers and enforcers on whether they found the

existing legislation and guidance clear and useful and what, if any, changes

they would recommend. In general, we heard that the guidance is helpful, but

the ongoing review of the PPG provides an opportunity for it to reflect current

pricing and promotional practices (particularly given technological

developments), give greater emphasis to the requirements of the CPRs, and

include examples of good and bad practices similar to those in the OFT

Principles.

4.100 A couple of more specific views were provided. One retailer urged against

legislative change, given their limited range of promotions and good track

record, and another suggested that all relevant legislation should be brought

together. One manufacturer and several enforcers said they have observed

different interpretations of the legislation and guidance by retailers, particularly

in relation to reference pricing, and clarity on such issues would be helpful.

4.101 The CMA’s assessment above has identified a number of areas where, in our

view, retailers would benefit from further guidance. We consider that this

could be provided by CTSI in the course of the review of the PPG. As we note

further at paragraph 5.72 below in relation to unit pricing, there may also be

scope for addressing aspects of the interplay between the CPRs and the

PMO in the context of such a revision.

Approaches to compliance

4.102 The CMA obtained information and documents from retailers to understand

their approach to embedding their interpretation of their legal obligations in

their policies, training and monitoring. Most retailers have policies and

procedures that set out their interpretation of the relevant law and guidance

and how it applies to their business. These documents underpin compulsory

training, focused on initiating and presenting promotions in a compliant

manner. Some retailers have sought input, assured advice and/or training

from their primary authority officers. Retailers rarely ask primary authority

officers to review specific promotions. Several retailers also obtain advice on

their external advertising of promotions from the Committees of Advertising

Practice (CAP) and receive updates on rulings and Code rules from their

stakeholder manager at the ASA.

4.103 Several retailers use automated checks to prevent non-compliant promotions

from being set up by buyers and manufacturers. Manufacturers also aim to

avoid funding promotions that, in their view, will not comply with the law and

guidance (such as the 28 day indicator set out in the PPG). In store checks

are conducted by most retailers. They appear to be directed at ensuring that

prices, labels and products are accurately displayed, rather than acting as a

further check on whether the presentation of the promotion, and the type of

promotion itself, is compliant. A few retailers carry out unannounced store

audits and mystery shopping exercises, and report mistakes to head office.

4.104 Broadly, the CMA found that retailers had put in place appropriate

mechanisms to secure compliance with the CPRs. The systems that had been

put in place by retailers reflected the principles of the CPRs and the guidance

provided by the PPG and, to some extent, the OFT Principles (bearing in mind

that only certain retailers subscribed to these Principles which are, in any

event, limited to food and drink retailing).

4.105 As is clear from our assessment above, we have seen evidence of different

interpretations of the guidance and legislation by retailers. This is, to some

extent, the inevitable consequence of principles-based legislation. However,

where we have identified particular issues of concern, or broad divergences of

approach, we have identified particular areas that CTSI might wish to address

through revised guidance as part of the review of the PPG.

4.106 We would note, however, that most retailers’ compliance mechanisms appear

to focus on ensuring ex ante compliance, through training buyers and

operational controls supporting the initiation of promotions only in accordance

with internal policies. We agree that this is, in general, the most appropriate

approach to securing compliance with the CPRs. However, we have observed

that, once promotions are set up in stores (or online), limited further ex post

checks appeared to be carried out to ensure that the ex ante compliance has

been successful in eliminating pricing or promotional practices that could

potentially lead to a breach of the CPRs. Our work in relation to the issues

raised by Which? in the super-complaint has involved several store visits,

some of which have highlighted particular issues that had not been identified

by the retailer as part of its ex ante controls.

Views of enforcers

4.107 The CMA asked primary authority officers and other TSOs about their

experience of enforcing compliance with the CPRs in relation to the

promotional practices identified by Which?.

4.108 We received details from TSS of relevant investigations in response to

consumer complaints that they did not recall higher ‘was’ prices being

charged and that it was cheaper to purchase products individually than as part

of a volume promotion. However, in general the CMA was informed that

enforcement work (including investigations, inspections and advice to

retailers) by TSS in relation to pricing and promotions was rare.

This is for a

number of reasons, including that they receive insufficient consumer

complaints to prioritise this issue over other consumer issues and, even if

issues are detected, not all TSS will have the time and resources to carry out

a complex investigation and take action against large, well-resourced

retailers. One primary authority officer informed the CMA that they may

assess whether a price is genuine if a complaint has been reported by

another TSO or the retailer has asked for advice.

4.109 Recent research commissioned by BIS and CTSI

has found that Local

Authority TSS are operating with a diminished resource base. That research

notes that:

(a) Budget cuts and reduced staff levels over the past five years has changed

ways of working and priorities. There has been a shift in approach, from

proactive and preventative to reactive and responsive. Their work is now

more driven by complaints from consumers and other intelligence reports,

and involves fewer routine inspections to check compliance levels and

fewer enforcement projects.

(b) While TSS are committed to supporting businesses to facilitate

compliance, their resource constraints mean they can no longer keep

regular contact through visits. To achieve greater efficiency and

effectiveness, TSS have moved to an intelligence led model. They have

also prioritised their activities, focusing less on low-profile, regulatory

activities such as analysing food samples and more on publicly visible

responsibilities, including protecting vulnerable consumers from rogue

traders, scams and door-step crime.

4.110 We have observed from our own work that in store monitoring is generally not

a priority area for TSS and they are unlikely to undertake proactive

inspections. A few primary authority officers carry out in store inspections

under their agreements with retailers, for example where new procedures are

being rolled out by the retailer, or in response to a report from another TSO.

This can involve reviewing pricing and promotions and how they are displayed

Relevant CPRs prosecutions taken by TSS are set out in Annex B.

Raine, J, Mangan, C and Watt, P, University of Birmingham Institute of Local Government Studies (March

2015), The impact of Local Authority Trading Standards in challenging times, pp4-6.

(both in store and online) for compliance with the CPRs. The consequences of

focusing on the lawfulness of promotions before they are implemented in

store or online may mean there is no clear overall picture from enforcers

about whether retailers are broadly complying with the CPRs. It could, as we

note at paragraph 4.106 above, also result in potentially misleading

promotions not being identified.

4.111 The CMA intends to share its findings, as well as further observations

obtained from our analysis of the mySupermarket data, with TSS and primary

authority officers as appropriate, in particular to the extent that these assist

enforcers in identifying priority areas for further work, including monitoring,

compliance and enforcement work.

4.112 The CMA is also aware of ongoing work to enhance the intelligence function

supporting TSS, in particular through a revision of the way in which particular

complaints are categorised by Citizens Advice.

This is a positive

development, which has the potential to more accurately pinpoint particular

pricing practices that may merit further attention. We would also draw

attention to our findings that consumers may not necessarily choose to

engage with the ‘traditional’ channels when reporting pricing practices of

concern, but may instead use other channels, in particular social media, to

prompt a particular response from a retailer or manufacturer.

Conclusions

4.113 Over the course of our investigation we have encountered examples of

particular pricing and promotional practices which, in our view, have the

potential to mislead or confuse consumers and thus lead to a breach of

consumer law. Where we have encountered such practices, the CMA will take

further action with the businesses concerned to secure the necessary change.

The CMA will ensure that relevant factors identified by retailers to explain their

use of particular price frames and promotions are taken fully into account as

part of this further work.

4.114 The evidence and data that we have gathered shows that the prevalence of

these issues is relatively limited, and in some respects concern only a limited

number of businesses and/or promotional practices. The majority of

promotions reflect the relevant legislation and guidance, and are underpinned

by internal policies and systems – on the part of both retailers and

manufacturers – that generally demonstrate a sound approach to compliance.

Citizens Advice Bureau (2015), Consumer Codes: 2015 Review Consultation.

4.115 We have seen evidence of different interpretations of the guidance and

legislation by certain retailers in relation to their pricing and promotional

activity. This is, to some extent, the inevitable consequence of principles-

based legislation. However, there is more that can be done to further increase

levels of compliance and reduce the incidence of the potential problems that

we have seen. Therefore, in addition to our direct follow-up work with the

relevant businesses, our response to the super-complaint highlights particular

areas where greater clarity should be provided through guidance to improve

the state of compliance with the key legislation in this area.

4.116 Recommendation 1: We recommend that the CTSI clarifies how the

legislation applies to certain promotional practices. This includes bringing

together the requirements of the existing PPG and the OFT Principles into a

revised set of guidance as to the likely application of the CPRs. In doing so,

we recommend they give particular consideration to: