OFT investigates online sales

Office of Fair Training (OFT) investigators will target “potentially misleading” internet insurance sales and comparison sites in two separate market studies into advertising and pricing.

The first, into online targeting of advertising and prices will cover behavioural advertising and customised pricing, where prices are individually tailored using information collected about a consumer's internet use. It is expected that this study will be completed by spring 2010.

The second, into advertising of prices, will consider pricing practices that may mislead consumers. The study will look in particular, but not exclusively, at how these practices are used online. It will examine practices including:

• drip' pricing, where price increments 'drip' through during the buying process
• 'baiting sales', where only some products are available at the discount price and consumers may ultimately purchase a full priced product
• 'reference prices', where there is a relatively high reference price compared to sale price, for example 'was £50, now £20', or '50% off'
• time-limited offers, such as sales which finish at the end of the month or special prices which are available for one day only
• complex pricing, where it is difficult for consumers to assess an individual price, for example 'three-for-two' or 'non-inclusive' prices, and
• price comparison sites which may use some of the practices described above.

It is expected that this study will be completed by summer 2010.

Heather Clayton, OFT senior director, said: “These studies will ensure that we keep up to date with the latest developments and, in particular, on how new pricing and advertising practices are emerging and evolving online.

“It is very important that the OFT's approach to potentially misleading practices remains well-informed by a sound evidence base, so we effectively protect consumers while allowing firms to compete freely.”

Possible outcomes may include:

• giving the market a clean bill of health
• publishing information to help consumers
• encouraging firms to take voluntary action
• encouraging an industry code of practice
• making recommendations to Government or to sector regulators
• investigation and enforcement action against companies suspected of breaching consumer law
• a market investigation reference to the Competition Commission.