In the past year or so the popularity of group-buying websites has increased dramatically. These websites offer discounts on products which are conditional upon a certain number of people signing up to purchase them. The Office of Fair Trading (OFT) has recently taken enforcement action against Markco Media which owns one such website, Groupola.
In July 2010 Groupola heavily promoted the sale of Apple iPhone 4 handsets for £99 - the normal retail price was £499. To be eligible to purchase the iPhone 4s, individuals were obliged to subscribe to the Groupola website and receive daily email alerts. More than 14,000 consumers signed up to Groupola in response to the promotion. In reality, only eight handsets were available for purchase but during the sale the Groupola website misrepresented that there were handsets still available to buy. It also stated that only 202 had been sold so far. Furthermore, on the day of the sale an employee of Markco Media published very favourable comments about the company whilst stating that he was not an employee of the company. He actually said “no - I don’t work at Groupola”!
The OFT investigated the promotion and said that Marko Media had contravened the Consumer Protection from Unfair Trading Regulations 2008 (Regulations) by publishing misleading information about the availability of the product and by the employee falsely representing himself as a consumer. The OFT obtained undertakings from the company and its directors not to continue or to repeat the infringements.
This case illustrates how important it is for retailers to take note of the Regulations, particularly in relation to what the OFT refers to as “bait pricing” – i.e. having only a small proportion of stock available at the advertised offer price. The OFT’s recent study into advertising practices found that bait pricing had significant potential to cause harm to consumers and should be prioritised for enforcement action under the Regulations. If you are a retailer which is using, or intends to use, bait pricing it is therefore very important that you are aware of the Regulations and take appropriate legal advice if you are not. The OFT’s powers extend far beyond seeking undertakings and include the imposition of fines and bringing civil and criminal prosecutions.
If you require advice on the Consumer Protection from Unfair Trading Regulations 2008 or any other aspect of e-commerce law, please contact andrea.curtis@birkettlong.co.uk.
