Why was Tesco fined £300,000?

Earlier this month Tesco was fined £300,000 in a case brought by Trading Standards officials.

The case revolved around the promotional sale of strawberries during a period in 2011. The supermarket giant was found to have sold the product at the discounted price for longer than they were available for the supposed full price, thus breaking promotion guidelines to which they are a signatory.

The case highlights the importance for retailers of fair price promotions - both in order to maintain trust amongst consumers, and in order to stay on the right side of the law.

What are the retail food pricing and promotional practices?

In 2012 the Office of Fair Trading launched an investigation into pricing practices in supermarkets. It was concerned that there could be confusion amongst consumers regarding the ways in which food and drink are sold and, while it did not find any evidence to suggest that the supermarkets were breaking the law, it did agree on a set of principles regarding promotions. Eight major retailers have so far signed up.

The principles apply to two promotional practices: internal reference pricing, and pre-printed value claims on packs. The first refers to things like half price stickers, while the second refers to printed material on packaging such as that promising “Better value”.

In the case of internal reference pricing, the principles state that “prices should never be artificially manipulated so that future planned discounts are made more attractive.” Retailers should not, for example, artificially inflate prices in order to produce a bigger discount later. Promotions should also follow the “1:1 ratio”, whereby prices should not be marked as discounts when the product has been discounted for longer than the period for which they were at the original price. Finally, references to previous prices “should only be used when they give a relevant and meaningful basis for comparison.” Meanwhile, in the case of pre-printed value claims, these claims must be objectively accurate, and it must not be possible to buy the same amount of an identical good cheaper elsewhere in the store.

The OFT’s principles have come to form a tacitly agreed code of best practice for retailers. Although you do not have to sign up to the principles, it is now generally expected that retailers will follow them.

It is also important to note that the Department for Business, Innovation, and Skills offers guidance to retailers in their pricing practices guide. Although some of these guidelines are not mandatory, they do take into account many of your potential legal responsibilities. You should ensure that you are properly acquainted with this document.