HC Deb 14 April 1972 vol 834 cc1669-80

4.3 p.m.

Mr. Greville Janner (Leicester, North-West)

I join in congratulating the hon. Member for Honiton (Mr. Emery) on his ministerial appointment. I can only hope that my incursions into the field of his predecessor did not speed his departure, because I formed a warm personal regard for him.

I am pleased to have this opportunity of bringing before the House the subject of the pernicious and growing practice known as double pricing. This is an American practice which has lately invaded the shops of this country and should be driven back across the Atlantic whence it came.

What is double pricing? Briefly, it is the creation of totally fictitious alleged recommended prices at which goods are seldom, if ever, sold. In other words, it is the sending out by manufacturers of totally false, misleading price lists setting out prices which are called "recommended" or "list" or "recommended list" prices but are not recommended to the retailers at all.

The effect of this is that retailers who wish to avoid showing apparent price cuts where there is none are at a grave disadvantage, and I regard this as a matter which should be dealt with through the manufacturers and at the earliest possible date.

Since first raising this matter in the House I have received a flood of helpful letters, comments and advertisements from all over the country, and I wish to deal with certain of the more blatant practices into which I suggest an inquiry is now overdue.

I deal first with those which affect every supermarket in the country and nearly all the ordinary household goods that they sell which are subject to the so-called mark-downs or special offers. I have before me the Daily Mirror of Friday of last week containing its excellent and helpful column called "Mirror Shopping Clock". Last week's article was headed Cleaning up on the spring-cleaning", which is a sentiment with which I heartily concur. It shows spring-cleaning items sold by some 10 supermarkets and, in all, about a dozen items. In every case where there is one the recommended retail price is shown in the first column. But scarcely one single item is sold by one single supermarket at the price allegedly recommended. Woolworth, Tesco, Sainsbury, Pricerite, Pricerite Discount, Key Market, Safeway, the Birmingham Co-op and Finefare are all sellinggoods with an alleged recommended price with cuts ranging from a small amount to as much as 10½p on a a 31½p item.

The items concerned are known to us all: Ajax, Vim, Flash, Windolene, J-cloths, Dettol, Pledge, Mansion oven pads, Dri-Foam cleaners and Brillo. All are household names which should not need to use the sort of promotion relying upon alleged recommended or list prices and then cut-price offers.

The Daily Mirror says in its admirable column: Has the urge hit you yet?"— presumably to do some spring-cleaning. I suggest that the time has come for the Government to do some spring-cleaning in the area of these double-priced, alleged, false cut-price offers.

One does not find them only when going to the shops. One gets them through one's door. Every door in the country receives offers, items and vouchers showing ordinary goods at cut prices. If they are genuine cut prices, more strength to the arm of the manufacturer, more credit to the dealer and more strength to the advertisers. I am not attacking genuine advertising. But if the cut-price offer is not cut-price at all, if the special voucher is for a product which is never sold at the original price, if there is a special pack with a flash across it which never was a large pack but is a smaller pack at a lower price, the housewife is being deliberately hoodwinked.

The object of this debate is to persuade the Government to prevent the hoodwinking of unsuspecting housewives. The sums involved may be small to the Government but they are large to the shopper. It is all very well to say that people must shop around. I cannot see housewives in Leicester, especially those who are out at work, taking an expensive bus ride from supermarket to supermarket in order to get 5p off a large Vim or2½p off a Mansion oven pad. Where there is a genuine promotion the housewife can benefit from it, but she should know what is genuine and what is not. The trouble about ordinary pricing now is that no one can any longer believe the genuine offers.

A prize example was brought to my attention originally by The Cabinet Maker and then exposed by the News of the World. It is now before me in the catalogue of a company called Lay-E-Zee Limited of 280 Bradford Road, Batley, Yorkshire. This company has a whole string of offers on—I regret to say—pink paper. The first is—Golden Cloud, list less 25 per cent. In other words, the company starts with a retail list price of £33.75. That is false, because it says less 25 per cent., £8.44", making a cost price of £25.31. Therefore, no retailer buys it even at the list price put out to retailers by the manufacturer.

The advertisement goes on: Purchase tax, £2.70…Cost plus tax, £28.01. With 60 per cent. profit"— which is a perfectly proper mark-up for a retailer with his overheads, £44.81. So the recommended price should be £44.81. No doubt at that price the article would be good value.

I emphasise that many of these double priced offers at reduced prices are good value, whereas at the inflated, alleged recommended price they are a hoax. The brochure price is not £44.81, but £69.95. In other words, it is sold for £44.81 and here is a brochure saying that £69.95 is the price. The advertisement goes on: Suggested retail, £49.95. Advertise: save £20 on a super comfort sprung edge divan set (shows 78 per cent. profit). So it goes on right the way through— Zenith, list less 20 per cent., Airedale, Bedale, an attractive range of damasks. Then there is something that is straight up another street in which I am interested—"All guaranteed 5 years". What a bed should be guaranteed to do for five years I do not know. Then it says: Promotional retail prices for divan sets (suggested). This is a totally improper way of advertising goods which are themselves no doubt perfectly satisfactory and which could be sold and are sold at a proper price without hoodwinking the housewife. Once somebody starts selling these beds showing vast cuts from the alleged recommended price, he is one up on those who do not do so and many retailers will feel that they must fall in line.

While listening to this afternoon's enthralling debate I have looked through the Evening Standard, which this evening carries a full page advertisement by Shopertunities Limited. In the middle it says this: Brand new world famous maker's super de luxe vacuum cleaner. Free, complete set of accessories. Over £22 off the price we could charge. The price that the company could charge is any price. The advertisement says: Manufacturers are famous household name. Not a cheap model made down to a price", whatever that may mean. This is no doubt a perfectly good model, but if it was such a sensational bargain at the full price no doubt it would be successfully sold at the full price.

The Yorkshire Post has been kind enough to supply me with details of Status Discount Warehouses, which deals in paint and decorating materials. Here the recommended price is not put. I am told that what this company does is to take the wholesale price, having brought it at a considerably lower price in bulk. It adds 40 per cent. to the wholesale price and calls that the list price or the ordinary price. Having put 40 per cent. on the wholesale price, it proceeds to mark it down having already marked it up, which is another rather curious form of selling goods which are no doubt perfectly satisfactory goods.

Then there are sale offers. In any paper tomorrow there will be found goods offered at half the normal retail price, with the statement that all must be cleared. I suggest to the advertising industry that this is a form of advertising which harms it. No one any more believes the "genuine offers", and whether one is dealing with washing machines, lawn mowers or beds or ordinary detergents much the same applies.

What can be done about this? First we have the Trade Descriptions Act, 1968. In this debate I am not entitled to call for more legislation, neither would I dream of doing so. However, when the matter was raised before, the Government said they would consider prosecutions. But I am not asking for prosecutions. I am asking the manufacturers to stop doing this before prosecution becomes necessary. I am asking for a full exposure from the Government, through a full inquiry by those who are in a position to carry it out.

Section 11 of the Trade Descriptions Act should be helpful. It says: If any person offering to supply goods of any description gives, by whatever means, any false indication to the effect that the price at which the goods are offered is equal to or less than—

  1. (a) a recommended price; or
  2. (b) the price at which the goods or goods of the same description were previously offered by him;
or is less than such a price by a specified amount, he shall, subject to the provisions of this Act, be guilty of an offence. One must not say that goods are sold at less than a recommended price unless they are. I would think that if goods are seldom if ever on sale at a price which is stated to be the recommended price, there is grave peril for those who engage in this practice. However, at the moment it is only possible to collect evidence which is provided by those who have been often fooled by it, and this is a matter which I suggest the Government could profitably take up for the benefit of all except those who engage in the practice. First, it would be of benefit to the retailers concerned, many of whom bitterly resent this practice and do not engage in it, but many who do so feel that it would be better if they did not have to do so in order to fend off the competition from those who do. It would also help the genuine advertiser so that those who read about a sale price or cut price or special offer can accept that they are genuinely getting something at a lower price—not necessarily because the price has been cut. It may be because of the bulk buying operation or a special offer from the manufacturer to the retailer. There are many ways in which real bargains are given.

I am not suggesting that the bargain hunter should be exiled. I want bargains for the housewife, but I also want those who see bargains advertised to be justified in believing what they see. That, after all, is the object of legislation and also, I am sure, the object of hon. Members on both sides of the House. Above all, it would assist the ordinary housewife who has not got the time or ability to shop around for the odd penny off, who is often fooled by fictitious advertising, who does not know when an offer is or is not genuine and who at present is fooled a great deal of the time.

In the circumstances, I trust that the Minister will give this suggestion his reasonable, careful and thoughtful consideration. I trust he will accept my suggestion and will agree to look into the whole matter and get his Department, which is well equipped, to inquire into this practice. We can then decided what further steps need to be taken to deal with a thoroughly unhappy and unnecessary advertising practice.

4.20 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Peter Emery)

I thank the hon. and learned Member for Leicester, North-West (Mr. Greville Janner) for the kind good wishes which he extended to me at the start of his speech. He has drawn our attention to an interesting and topical issue, and I know that the House will be grateful to him for ventilating it in the way he did. However, I am sure that he realises that it is not quite so simple an issue as might be thought from some of his remarks.

I think it will be helpful if I spend a few minutes setting out the framework within which this subject has to be approached, after which I shall deal with the suggestion for an inquiry which the hon. and learned Gentleman made. We must start by recognising that there is not, and, in my view, should not be, uniformity in the costs or in the methods of retailing.

At one extreme, there is the establishment which operates at an expensive central site, having spacious display facilities, offering the maximum service both before and after purchase, maintaining large stocks so that it may deliver promptly, offering a wide range for selection, and, perhaps, having an accounting system which allows credit. At the other end, there is the retailer offering a limited range of what he hopes are fast-moving goods, probably on a self-service cash-and-carry basis. In between there are all sorts of variants.

The price which the retailer charges must inevitably reflect the quality of the service which he sets out to provide, as well as his own efficiency.

By the action which we took in 1964 regarding resale price maintenance—it is to the credit of the Conservative Government that we did it—we set each retailer free to offer whatever combination of price and service he wished to provide. Thereby, we gave the consumer the freedom of choice which we consider is his proper right, freedom not only to choose the goods which suit him best but also to choose the source of supply which offers the combination of service and price which most appeals to him.

The retailer who offers a lower than usual price could, I suppose, simply sit back and wait for the customer to wake up to the fact that his goods were being sold at a price lower than was charged elsewhere. But it is neither helpful to real competition nor convenient for the customer—certainly not for most customers—for the retailer to sit back and just hope that something will happen. He needs to find some way of making known the fact that he is a cheaper source of supply while making clear how cheap a source he is.

For that purpose, reference to the manufacturer's recommended price, if there is one, provides a handy comparison. For example, let us assume that Deluxe Incorporated, a large store in the West End, sells at the recommended price. Mr. Brown proclaims that he sells at £3 less than the recommended price at a store, say, in Leicester. Charlie, in Petticoat Lane, proclaims that he charges £6 under the recommended price. The price relation and the comparative charges are made clear to the potential customer, with a minimum of detailed inspection, when he shops around.

There is, therefore, nothing peculiar or reprehensible—I want this clearly understood—about comparisons with recommended prices so long as such comparisons are honest.

Mr. Greville Janner

Hear, hear.

Mr. Emery

Nor is it any disproof of the honesty of the comparison if some retailers sell at consistently below, perhaps very much below, the recommended price, so long as there are others who are charging the full recommended price.

Mr. Greville Janner

Hear, hear.

Mr. Emery

The explanation is likely to be that it is a line of goods in respect of which the maximum quality of retailing service is particularly expensive to provide.

The only circumstances in which the practice of comparison with recommended prices is open to question arise where the so-called recommended price is a grossly inflated mark-up. Where this is so, the effect, it seems to me, is clearly to exaggerate the extent to which the retailers price is really a bargain. Whether such an approach to marketing will be successful in the long run or will prove self-defeating is open to question. But I hope that ordinary shoppers are not fooled.

Some goods are habitually sold by retailers for less than the recommended or list price, as is only too obvious if one walks down almost any High Street in the country. There are two conclusions which may be drawn. First, we may think that, if the products of a particular company can always be obtained at less than the manufacturer's apparent estimate of their worth, there must be something wrong with them, since they never should have fetched that price originally. Or we may decide, after examining the goods and deciding they are suitable for our needs, that since every retailer offers a discount the sensible thing is to find the one who offered the highest discount. That is something for the customer to find by shopping around.

It is obviously right that the customer should have some protection against the quotation of a "phoney" recommended price. To do this there are already relevant provisions in the Trade Descriptions Act. It is important to state these in some detail and to explain them because only by doing so would it be possible to see their relevance in the debate. Section 11 states: If any person offering to supply goods of any description gives, by whatever means, any false indication to the effect that the price at which the goods are offered is equal to or less than…a recommended price…or is less than such a price by a specified amount, he shall, subject to the provisions of this Act, be guilty of an offence. The section goes on to lay down that, unless the contrary is expressed, an indication of a recommended price shall be treated as an indication that it is a price recommended by the manufacturer or producer. This is of particular importance to the signs and displays seen around the country and is an indication that it is a price recommended generally for supply by retail in the area where the goods are offered.

The section says that anything likely to be taken as an indication as to the recommended price is to be treated as an indication. This seems fairly obvious but it needs to be stated. Perhaps it might even be suggested that it sounds involved, but it needs to be put quite clearly.

It should be noted that a person advertising goods as available for supply is to be taken also as offering those goods for sale. The hon. and learned Member will understand the import of this in the legal context. Of course, only the courts can decide how this bears in a particular case but it seems clear that if a comparison is made with some price which, however described, is likely to be taken as meaning the recommended price, the Act can be brought to bear if it is not the price which the manufacturer has recommended.

This is a matter of some importance. If the manufacturer, though describing it as a list or recommended price, also makes it clear to the retailer that it is not one which he expects the retailer to charge—and this may well cover some of the examples given by the hon. and learned Member—the Act will apply. If more than one price is recommended to different retailers in the area the Act would also operate.

The question remains as to what the situation would be if it could be shown that though a manufacturer firmly recommended a price it was set so high that no one did or could, by custom of the trade, expect to charge that price. This again is an example we have had before us—where the recommended price was set artificially high. If in that way it was established that the recommendation could not have been made in good faith could it really be claimed that the price recommended came within the meaning of Section 11(3)? This is not a matter which has been decided in the courts and it is not for me to hazard a guess as to the outcome if such a case was brought. I would be a fool so to do. But before it has been put to the test I do not think we should assume that the Act could not deal with the cases brought up in this debate; in other words, those instances in which comparison is made with a flagrantly exaggerated recommended price which nobody charges or is likely to charge.

However, if someone did charge that recommended price, it would be difficult to say that that was not genuine. Therefore, it is my view that what is needed is not a general inquiry into double pricing, which I believe would add little to our present commonsense appreciation, which has been so ably expressed by the hon. and learned Gentleman, but individual inquiries into particular cases with a view to finding out whether they involve any contravention of the existing provisions of the Trade Descriptions Act, and, if so, whether it could be appropriate to bring a case before the courts.

The right people to carry out such inquiries are the local weights and measures authorities, who are under a statutory duty to enforce the Act and have all the necessary powers to carry out such inquiries. Obviously, however, they must expect to look to the trade for assistance in this matter. I hope that all who have made their views known to the Press and others will produce to their local weights and measures authorities the hard evidence, so that inquiries can be made.

I willingly accept that retailers themselves are just as furious about spurious offers as are the customers who are taken in. Whilst I believe that the vast majority of shops and retailers wish to be fair, the Government wish to ensure that retailers do not deceive the public. Such a practice is contemptible and should be utterly condemned. Therefore, I am willing to give notice today that the Government will give every encouragement to local authorities so that anyone who is minded to practise such a trick must recognise that the full power of the Trades Descriptions Act is liable to be used against him.

I hope that one result of our debate will be to put traders and shoppers on notice of this fact. It should encourage them to let their local weights and measures authorities know of any examples of the practice which they have encountered. The public must help to provide this information so that inquiries can be made and then, if the allegations can be established, prosecutions take place.

The Government are determined that the consumer shall not be taken for a ride.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Five o'clock