Practical Law

In 2015, more retailers than ever in the UK followed the lead of their US counterparts by running promotions on “Black Friday” and “Cyber Monday”, days that have become associated with frenzied bargain hunters seizing televisions and other goods, at unbelievable prices. As a result, retail sales slowed in December, so retailers attempted to extend that Black Friday “fever” by lining up new “not to be missed” offers in the important days leading up to Christmas. Many traditional Boxing Day sales started online even before Downton Abbey was on, with Amazon’s sale starting at 4pm on Christmas Day.

The most pressing issue for in-house lawyers in retail is embedding the right process before, during and after critical sales promotions to ensure that they can drive sales without eroding customer goodwill or attracting the bad feeling that leads to complaints to the Advertising Standards Agency (ASA) and the bad publicity that accompanies such complaints.

In the last 12 months, the ASA has ruled against several high-profile retailers for advertising time-limited offers that, following the closing date, were immediately (or within a few days) superseded by the same offer or an even larger discount.

For example, in September 2015 the ASA ordered Oak Furniture Land “to not imply that a stated price was time-limited, or represented a discount from the price at which the product was usually sold, if that was not the case.” Oak Furniture Land’s website featured a banner that stated: “72 hour savings MUST END WEDNESDAY” and included a countdown. The ASA received a complaint from a member of the public who believed the time limited promotion was misleading because they believed that when one sale ended another, with the same discounts, commenced.

The “72 hour savings” promotion applied only to a limited number of products despite the fact that several products on the website were listed with “was” and/or “now” prices. The ASA understood that if a customer clicked on the promotion banner they were taken to a page that listed the products subject to the promotion. However, the ASA considered that “consumers were likely to assume that any product listed on the website with a “was” or “now” price was included in the time-limited “72 hour savings” and consequently the promotion was held to be misleading.

This ASA decision demonstrates that advertisers running time-limited promotions must make it clear to consumers which products are subject to the promotion, as well as making clear all other relevant terms and conditions. In particular, retailers should be careful to word promotions clearly when using time-limited offers if their business regularly offers short-term promotions that may supersede earlier sales offers.

So, what should retailers do when planning flash sales and other short-term offers likely to trigger very high demand? Here are a few practical and legal pointers to help retailers ensure that their sales promotions avoid regulatory issues or a backlash from consumers.

Step one: put the right plan and process in place

Retailers should produce an effective plan for each sales event and make sure they have all the right systems and procedures in place:

• Ensure you have made a reasonable estimate of likely demand. How have similar promotions fared in the past? How widely have your offers been promoted?
• Make sure you have sufficient stock levels to meet that demand.
• Test your IT systems and ensure they are resilient and will not fall over when dealing with the increased level of users.
• Employ adequate numbers of staff and train your sales teams to cope with the high volume of consumers they will have to deal with.
• Build contingency into every aspect of the offer to avoid disappointing customers. For example, consider flexibility for staff to make ‘‘under the counter’’ offers on similar products.
• Review your terms and conditions and advertising, and increase timeframes for deliveries, product returns and refunds if necessary. Advertise these changes appropriately with the offer.
• Carry out a health and safety assessment and employ adequate security staff to assist with managing crowd control.
• Plan and organise the store layout and use signage to help consumers navigate your store.
• Plan, plan and plan some more! Remember that an obvious source of customer dissatisfaction, and probably the most common trigger for ASA complaints in retail, is an attractive deal that the consumer cannot obtain when they visit the store or website.

Step two: check your advertising

Retailers will want to advertise their sales promotions widely to grab consumer attention and stay ahead of their competitors.

Avoid misleading advertisements. Retailers must ensure their advertisements, sales offers and product promotions are compliant with laws and obligations under the Committee of Advertising Practice’s UK Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing (the CAP Code). To avoid issues under the Consumer Protection from Unfair Trading Regulations (CPRs), enforced by the Trading Standards Institute (TSI), retailers must not engage in any of the following:

• Misleading advertising.
• “Bait advertising”. This is where retailers offer goods for sale at a price where they have reasonable grounds for believing that they will not be able to supply those goods at that price and in quantities that are reasonable (having regard to the product, the price and the scale of advertising).
• “Bait and switch’’. This involves offering goods for sale that are not actually available, or not available at the price promoted, to attract consumers into a store or to a website, with the intention of selling the consumer a different product.
• Falsely stating that a product will only be available at a particular price for a limited time.

Comply with the CAP Code. The CAP Code is enforced by the ASA, and sets out rules governing the content of marketing and advertising communications. It restricts misleading advertising but also provides additional rules in relation to sales promotions.

Retailers must conduct their sales promotions equitably, promptly and efficiently and be seen to deal fairly and honourably with participants, and they must avoid causing unnecessary disappointment. Phrases such as “subject to availability” and “first come, first served” will not absolve a retailer of their obligation to do everything reasonable to avoid disappointing consumers.

In addition, retailers will be required to show that they have made a reasonable estimate of the likely response to a sales promotion and that they were capable of meeting the estimated demand, or the consumer was presented with sufficient information, in a clear and timely manner, to take an informed decision as to whether to participate in the promotion or not.

Common issues that can arise under the CPRs or the CAP Code in relation to short term, high publicity price promotions include:

• Misleading consumers by exaggerating the savings. For example: “WAS [NEVER REALLY] £1,000, NOW £500!” This includes advertising a discount against a higher price that is not the normal price for the goods. For example, because the higher price is not the immediately preceding price, is not a price that has been charged for a sufficient period or in sufficient stores or is not a price at which the retailer expected to make significant sales. Retailers should review the Pricing Practices Guide published by BIS (a revised version of which is currently subject to consultation on the TSI’s website).
• Falsely instilling a sense of urgency. For example: “ONE DAY ONLY BLACK FRIDAY DEALS! [NOT REALLY, WE’LL BE BACK WITH THE SAME OR SOMETHING BETTER TOMORROW]“. The ASA has ruled this kind of activity misleads in situations where a call to action is used (“HURRY, MUST END SOON!”) but also in situations where there is no such call to action, just a closing date for the original offer.
• Failing to stock to meet likely demand (or to explain to the consumer the limitations on stock so they can make an informed decision on whether to go into store or visit the website). For example: “FLATSCREEN TVs FOR £100! [WE’VE ONLY GOT TWO OF THEM AND WE’RE PRETTY CONFIDENT THEY’LL BE GONE WELL BEFORE YOU GET HERE]“.The non-availability of an advertised offer is always aggravating for consumers who have gone into store or online to seek out that offer and is therefore a common cause of complaints to the ASA. It is easy to see how allegations of “bait” advertising could be raised if the relevant retailer has not stocked to meet the likely demand.

In practice, as a retailer marketing a flash sale you must:

• Ensure that your offers are genuine and unlikely to mislead. Don’t be tempted to exaggerate an offer.
• Don’t be tempted to shortcut your normal clearance checks because of the urgency or volumes of offers.
• Ensure discounts are against the normal price for the goods.
• Make sure that your advertised deals are going to end when you say they will (and the discount will not be repeated or bettered in the days immediately following the event).
• Carefully check that you have stocked to meet the likely demand, given the desirability of the offer and the scale of advertising you have planned. Also remember that, even with relatively little above the line promotion, news of great deals can spread like wildfire through Money Savings Expert and other online platforms.
• If there are likely to be limitations on stock, then make that very clear in your advertising (and not just with generic “Subject to availability” small print) so consumers can make an informed decision whether to seek out the offer (in the full knowledge that stocks may be exhausted).
• Consider the relationship with other offers. Can consumers claim a Boxing Day discount in conjunction with other deals or discounts?

 Step three: put it all into practice

When the sales event goes live, retailers must honour their promotions and ensure they implement their plans effectively:

• Ensure you have sufficient stock on the shelves to meet demand.
• Have adequate staff available to assist with the high number of customers visiting the store or website.
• Process sales transactions efficiently.
• Monitor your IT systems and consumer activity and take steps to deal with increased demand.

Step four: deliver when you say you will

Even after the main event has finished, it’s not all over. Another very common cause of consumer complaints to the ASA relates to late delivery (and consumers therefore claiming that advertised delivery times are misleading).

A recent ASA decision considered that very issue in relation to “Black Friday”’ and a ‘”Next day delivery”’ claim. Although the ASA identified a fall in the number of successful next day deliveries by the relevant retailer following “Black Friday” and “Cyber Monday”’, the vast majority of deliveries were still on time and the ASA therefore found that the “next day” claim was not misleading. The decision would certainly have gone the other way had the vast majority of consumers not still received their order the following day.

So, following your flash sale event or similar offers:

• Process orders quickly and in accordance with your terms and conditions.
• Honour your delivery obligations to the customer and get products delivered in accordance with advertised delivery times.
• Where there is likely to be a drop in performance against advertised delivery times, as an absolute minimum, seek to ensure that 90%+ of your deliveries are still being delivered in accordance with the advertised delivery time and resolve the issue as soon as possible (days, not weeks).
• Process product returns and refunds efficiently and in accordance with your terms and conditions.
• Respond to and resolve customer enquiries in as timely and effective a manner as possible.
• Consider empowering customer service staff with discretion to make goodwill adjustments to ensure customer satisfaction. Incentivise them to deal cheerfully and proactively with problems as soon as they arise.
• Seek advice early on any ASA or regulatory complaints. Sometimes issues can be resolved quickly and informally without bad publicity.
• Hold a review after the event to draw out what went well and what did not. Learn the lessons and wait for the Spring sales…