MISLEADING PRICE INDICATIONS

Part III of the Consumer Protection Act 1987 sets out to protect consumers against misleading price indications by providing for two offences under s.20:

(1) …a person shall be guilty of an offence if, in the course of business of his, he gives (by means whatever) to any consumers an indication which is misleading as to the price at which any goods, services, accommodation or facilities are available (whether generally or from particular persons).

(2) …a person shall be guilty of an offence if-

(a) in the course of business of his, he has given an indication to any consumers which, after it was given, has become has become misleading as mentioned in subsection (1) above; and

(b) some or all of those consumers might reasonably be expected to rely on the indication at a time after it has become misleading; and

(c) he fails to take all such steps as are reasonable to prevent those consumers from relying on the indication.

In order to obtain a conviction the following conditions must be satisfied

The proper person is being prosecuted

Inclusion of the words “in the course of business of his” in section 20 indicates individual employees should not be prosecuted, however by s.40(2) a prosecution may be brought against “any director, manager, secretary or other similar officer” where the company has committed the offence with their consent, collusion, or simple neglect.

That there has been indication

As the offence is committed by giving an indication “by any means whatever” an offence would be committed if an initial indication was corrected later see Doble v. David Greig Limited [1972] 1 W.L.R. 703.

The indication concerned the matter of price

Price is defined by s.20(6) as:

(a) the aggregate of sums required to be paid by a consumer for or otherwise in respect of the supply of the goods or the provision of services, accommodation or facilities; or

(b) …any method which will be or has been applied for the purpose of determining that aggregate.

The price indication was made to consumers

The offences can only be committed with reference to consumers and s.20(6) defines consumers as follows:

(a) in relation to any goods, means any person who might wish to be supplied with the goods for his own private use or consumption;

(b) in relation to any services or facilities, means any person who might wish to be provided with the services or facilities otherwise than for the purposes of any business of his; and

(c) in relation to any accommodation, means any person who might wish to occupy the accommodation otherwise than for the purposes of any business of his.

Inclusion of the words “might wish to be supplied” indicates that consumers need not have been actually supplied for an offence to be committed.

The price indication was misleading

Section 21(1) states:

an indication given to any consumers is misleading as to price if what is conveyed by the indication, or what those consumers might reasonably be expected to infer from the indication or any omission from it, includes any of the following, that is to say-

(a) that the price is less than in fact it is;

(b) that the applicability of the price does not depend on facts or circumstances on which its applicability does depend;

(c) that the price covers matters in respect of which an additional charge is in fact made;

(d) that a person who in fact has no such expectation-

(i) expects the price to be increased or reduced (whether or not at a particular time or by a particular amount); or

(ii) expects the price, or the price as increased or reduced, to be maintained (whether or not for a particular period); or

(e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are.

The misleading price indication is not in relation to the sale of new home

Section 23(1) excludes from the Act “the creation or disposal of an interest in land”, however such a transaction is will be subject to the restrictions on misleading price indications where:

(a) the person who is to create or dispose of the interest will do so in the course of any business of his; and

(b) the interest to be created or disposed of is a relevant interest in a new dwelling and is to be created or disposed of for the purpose of establishing that dwelling to be occupied as a residence, or one of the residences, of the person acquiring the interest.

Thus both brand new homes and conversion of old buildings which have not been dwellings into homes is covered by the Act.
Code of Practice for Traders on Price Indications

Under powers granted under s.25(1) to the Secretary of State the Code of Practice for Traders on Price Indications has been approved so as to give practical guidance and promote desirable practices.
The legal of effect of the Code is two fold. First a breach of the code can be used as evidence in a prosecution to establish the offence, and adherence to the code can amount to a defence. Section 25(2) therefore states:

A contravention of a code of practice approved under this section shall not of itself give rise to any criminal or civil liability, but in any proceedings against any person for an offence.

(a) any contravention by that person of such a code may be relied on in relation to any matter for the purpose of establishing that the person committed the offence or of negativing any defence; and

(b) compliance by that person with such a code may be relied on in relation to any matter for the purpose of showing that the commission of that offence by that person has not been established or that that person has a defence.
Regulations

In addition to the provisions in the Consumer Protection Act 1987 prohibiting misleading price indications, Regulations have been made by the Secretary of State under powers granted s.26 to ensure:

Clear indication of pricing where price varies with method of payment.

Clear indication of exchange rates at Bureaux de Change where rates for travellers’ cheques and notes vary.

Clear indication of pricing where price varies with method of payment

Under Price Indication (Method of Payment) Regulations 1991, a supplier who indicates a price to customers for goods, services, accommodation or facilities but is not prepared to do business at that price regardless of the method of payment must make a clear statement as to the difference in prices. Such a statement must generally be prominent:

a). at the public entrance(s) to the suppliers premises; and

b). at every place in the supplier’s premises where customers make payment.

Clear indication of exchange rates at Bureaux de Change where rates for travellers’ cheques and notes vary

Under Price Indications (Bureaux de Change) Regulations 1992 any differences in exchange rates between travellers’ cheques and notes must be indicated “clearly and prominently” to customers as they enter or approach the bureaux de change.
DEFENCES

In addition to the general defence of “due diligence” there are four specific defences listed in s.24 which provides:

a). where the acts or omissions giving rise to the offence were authorized by Regulations made under s.26.

b). where the price indication is in a publication not amounting to an advertisement.

c). where the price indication is a published advertisement but the publisher or advertising has no reason to suspect that the price indication is illegal.

d). where a prosecution is under s.20(1) and the misleading price indication arises from a recommended price to be followed by a third party but which has unexpectedly not been followed by the third party.

“Due Diligence”

The defence of due diligence is provided for by section 39(1) which states:

“…in proceedings against any person for an offence…it shall be a defence for that person to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence”

If the accused wishes to argue a due diligence defence on the basis of the act or default of another person then it can only be argued if seven clear days before the hearing the accused serves on the prosecutor a written notice giving the such information as to identify the person responsible. In addition to this information the accused must also show that it was reasonable for him to rely on and trust the information in the light of possible steps which could have been taken to verify it. Should a valid defence of due diligence be made out then the person whose act or default has given rise to the offence may be properly prosecuted by virtue s.40(1) which states:

Where the commission by any person of an offence to which section 39 above applies is due to an act or default committed by some other person in the course of any business of his, the other person shall be guilty of the offence and may be proceeded against and punished…whether or not proceedings are taken against the first-mentioned person.

Inclusion of the words “in the course of any business of his” in s.40(1) means that a private person cannot be prosecuted. Some businesses may seek to evade liability by blaming their employees and since s.40(1) cannot be deployed against private persons a wrongly blamed employee may not mind too much as there can be prosecution of a private individual. A careful prosecution will therefore involve not only an examination of the circumstances by which the offence arose, but

whether there was adequate supervision and instruction of the employee so as to enable raising of the defence of due diligence; and

whether any alleged supervision and instruction of the employee is genuine or a sham – by looking at what disciplinary measures have been taken against the employee for causing the offence to occur.