Guidelines On Price Transparency: 4 “Strategies” Businesses Should Avoid In Infringing The Consumer Protection (Fair Trading) Act (“CPFTA”)

Businesses should know that selling at the best price is not the only key to a consumer’s satisfaction; Consumers appreciate transacting with businesses that have shown to be transparent and fair when it comes to service and product delivery. 

The introduction of The Consumer Protection (Fair Trading) Act (CPFTA), which took effect in March 2004, has helped protect the interest of consumers. In 2012, the Act was enhanced to include Lemon Law to protect consumers against goods that are not of satisfactory quality or performance at the time of delivery.

Come November 2020, Guidelines on Price Transparency, developed by the Competition and Consumer Commission of Singapore (CCCS), will take effect. The guidelines will set out how the CCCS will interpret the CPFTA to eradicate errant practices, as well as to provide greater clarity to businesses on the possible pricing practices that will potentially infringe the CPFTA, thus enabling consumers to make informed decisions when making a purchase. This is mainly in relation to display/advertisement of prices and pricing practices such as time-limited discounts, free offers and price comparisons.

The CPFTA lists unfair practices that a seller may adopt such as:

  • to do or say anything, or omit to do or say anything, if as a result a consumer might be reasonably deceived or misled;
  • to make a false claim; or
  • to take advantage of a consumer if the supplier knows or ought reasonably to know that the consumer is not in a position to protect his/her own interest or is not reasonably able to under the transaction or any matter related to it

As a business, these are the four areas you should take note of with the introduction of the guidelines: drip pricing, price comparison, discounts and the use of the term “free”.

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#1 – Drip Pricing

Drip pricing is a pricing technique where only part of an item’s price is advertised, with the total amount revealed at the end of the purchasing process. 

For example, the price of an air ticket listed in a newspaper advertisement may not be what the service will eventually cost to the consumer. This may include GST or hidden fees, such as booking fees and credit card fees that will only be added at the payment stage of the transaction, as well as the presence of pre-ticked boxes for certain charges during the purchase process, which is not indicated prominently to consumers who may end up purchasing unwanted services.

Under the new guidelines, businesses should ensure the headline price displayed on advertisements include the mandatory fees, such as taxes, service fees and surcharges. Should any mandatory fees or charges cannot be reasonably calculated in advance, businesses should disclose the existence of such charges prominently. 

In addition, businesses should adopt “opt-in” or “opt-neutral” approach when including add-ons, allowing consumers to check a box to select the specific add-ons they would like to have. 

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#2 Pricing Comparison

Businesses have known to make price comparisons with their competitors to indicate a price advantage, such as “best price in Singapore, our price $20, elsewhere $30”. 

However, there may be cases where a business may advertise a price as having an advantage over their competitors when it may not be necessary so. For example, an electronics store may advertise the price of a model of earphones at $30, while indicating the price of $50 offered by their competitor. However, the competitor may retail the earphones at $30, with no obvious price advantage.

In accordance with the new guidelines, businesses should ensure that any comparison made with their competitor’s price are not misleading or inaccurate. Businesses should only compare the prices of goods or services that are generally accepted to be similar or equivalent by consumers or trade. 

In addition, businesses should check and update reference prices regularly and keep records to prove that the price comparisons are not misleading.

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#3 – Discounts

There may be occurrences where businesses may advertise a false discount off the usual price of a good or service. One such example may be that discounts may be made in comparison with the pricing of a competitor’s, instead of the original price of the product.

To avoid any confusion, businesses, when offering a discount or making comparison with the usual price, should ensure the information is reflected genuinely. For example, they should take reference the price benefit from the original price of the product, to use a price that has been used for a reasonable amount of time, and not to increase prices before applying discount on the product or service. 

In addition, the duration of the discount, as well as any accompanying terms and conditions, should be stated clearly for consumers. 

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#4 – Use Of Term “Free”

Some businesses have used free gifts to entice consumers to purchase their products or services, but such gifts come with conditions attached. For example, a magazine publisher may offer new subscribers a “free” electronic tablet during a promotion worth $100 but has increased the subscription price by the same amount, thus misleading customers into thinking they are getting something for free when it is not the case.

In accordance with the guidelines, businesses should ensure that the use of the term “free” or “$0” is accurate and not misleading, and any charges and key terms should be stated clearly together with the “free” representation. 

For any free trials, businesses are encouraged to inform consumers of the information on subsequent charges and cancellation process.

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While adhering to the guidelines may take some effort, businesses should take advantage of the opportunity by reviewing their pricing practices and making necessary improvements, if required. After all, businesses will also stand to gain as fair trading practices can go a long way in building a reputation as a trusted trader.

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From now till 31 March 2021, SMEs can enjoy extra financing support of up to $5 million through the Temporary Bridging Loan Programme.

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