Unit pricing in a period of grocery inflation

The consumer group, WHICH?, has renewed its focus on unit pricing in the grocery sector by reporting its concerns about Tesco’s Clubcard pricing to the Competition and Markets Authority (CMA).

Unit pricing indicates the cost of a product by weight or volume (10g, 100ml etc.). Retailers are under a legal requirement to display unit price alongside a product’s selling price. This allows consumers to compare the relative cost of products with varying pack sizes and to identify best value. The shelf-edge indication of unit price is considered to be particularly valuable in an inflationary period when household budgets are constrained.

The CMA announced in January that it would revisit the issue of unit pricing practices in the grocery space. This follows the attention it gave to the issue in its 2015 response to a super-complaint by WHICH?. The CMA considered concerns raised by the watchdog about the legibility of unit pricing, the inconsistency of approach by traders and the absence of unit prices in relation to products on promotion. The recent criticism of Tesco by WHICH? reflects that, while Tesco indicates the selling price and the unit price of its products, it does not present the unit price of products that are subject to Clubcard discount.

What does the law say?

The legal position is not straightforward. The Price Marking Order 2004 allows retailers to indicate by means of a general notice that products are for sale at a reduction, provided that the details of the reduction are prominently displayed, unambiguous, easily identifiable and clearly legible. As the CMA acknowledged in its response to the super-complaint, this implies that traders don’t need to give the unit price for a reduced product as long as they indicate clearly that the product is on sale at a lower price.

This leaves those believing that more should be done to provide clarity to consumers to argue that other legislation is relevant. WHICH? ventures that the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) are engaged and that unit prices are ‘material information’ that the average consumer needs to take an informed decision on purchasing. The absence of unit pricing in relation to products on promotion could amount, it believes, to a misleading practice and so an offence under the CPRs. The CMA opened the door to this analysis in 2015 when it said that it could be argued that failing to display the new, lower unit price for a reduced item could be considered a misleading omission as it has the potential to constitute material information. At the same time, the CMA recognised that if shelf-edge labels give two unit prices (reflecting the position before and after the application of the promotion), there may be scope for consumer confusion or an impact on legibility – space is inevitability limited on a shelf-edge label. The CMA felt that work could usefully be done to review the Price Marking Order and its accompanying guidance in order to achieve greater clarity for industry and consumers.

WHICH?’s reporting of Tesco to the regulator for failure to include the unit price of products subject to Clubcard discount revisits its campaigning in this area. Tesco has voiced its disappointment at the criticism given what it views as its compliance with current rules.

What are the next steps?

The CMA intends to provide an update on its project later this year. Food retailers will want to consider its eventual findings carefully. It’s difficult to imagine that the regulator will find retailers in breach of PMO requirements when failing to indicate a promotional unit price. It could recommend that guidance on pricing practices be reviewed with a view to interpreting promotional unit prices as material information for CPRs purposes. That would have consequences for the way in which retailers present promotional price information online and on shelf-edge labels in-store. Trading Standards Officers would consider any amended guidance when carrying out their enforcement function and assessing the extent of compliance.

In any event, the prevalence of grocery inflation and the desire to give consumers information to make rational and effective purchasing decisions will ensure that this issue attracts attention for the foreseeable future.

If you have questions about unit pricing, please contact Sarah Taylor.