Competition watchdog unveils price transparency guidelines targeting hidden charges, fake discounts

 

• Competition and Consumer Commission of Singapore is tackling the use of fake discounts and non-disclosure of hidden extra costs in advertising 
• Businesses should also not offer fake “free” gifts and inaccurately compare their prices with those of their competitors, it said
• Guidelines pushed out by the commission will kick in on Nov 1
• The competition watchdog is also reviewing its consumer protection enforcement and looking at imposing fines on errant businesses

 

 

SINGAPORE — Guidelines designed to ensure that businesses spell out the prices of goods and services clearly in their advertising were unveiled by the Competition and Consumer Commission of Singapore (CCCS) on Monday (Sept 7).

The guidelines, which will take effect on Nov 1, aim to ensure that advertised “discounts” are genuine, and that mandatory costs such as taxes and fuel surcharges are included in the upfront advertised price and not hidden by so-called drip pricing.

Businesses should also not add the cost of “free” gifts in their prices or compare prices to those of their competitors incorrectly, the guidelines state.

During a press conference on Monday, the competition watchdog said that these guidelines will help to “interpret and give effect to the Consumer Protection (Fair Trading) Act (CPFTA)” and will apply to both online and brick-and-mortar businesses.

They are targeted at prices that are displayed on advertising and cover four key pricing strategies: Drip pricing, price comparison, discounts, and use of the term “free”.

The Consumers Association of Singapore (Case) received at least 117 consumer complaints on these issues in 2018, which rose to 129 in 2019.

However, CCCS said on Monday that it did not release these guidelines in response to the increase in complaints. Rather, it was a response to a 2019 study on online travel booking it conducted.

Ms Davina Wong, senior assistant director of consumer protection with CCCS, said that the study revealed that businesses needed more guidance in these pricing practices.

While these guidelines are not a substitute for the CPFTA and its regulations, CCCS will give a warning or apply for an injunction order on businesses that do not follow them, she added.

CCCS' chief executive Sia Aik Kor said that these guidelines will benefit businesses as “fair trading practices can go a long way in building a solid reputation as a trusted trader" and will help build a credible marketplace.

Mr Lim Biow Chuan, president of Case, welcomed the guidelines, adding that they will help steer businesses to comply with the CPFTA and show them how they can be upfront in communicating their prices and marketing their promotions.

“This will, in turn, provide consumers with a greater sense of assurance when they shop, since they will have greater access to information with which they can make a more informed purchasing decision,” he said.

DRIP PRICING

Drip pricing is a strategy where retailers advertise the price of an item without including other costs, then "drip" the extra fees as the transaction unfolds.

At a press conference, CCCS said that one example of drip pricing is airline tickets, where advertisements often do not include the costs of surcharges such as booking fees and fuel surcharges.

It also highlighted that a common method to drip optional costs on customers is through pre-ticked boxes in online purchase websites.

Businesses should ensure. that added costs such as taxes and surcharges are included in the headline price, the guidelines state. If such charges cannot be calculated in advance, such as conversion fees, businesses should state them clearly with the headline price.

If pre-ticked boxes are used, businesses should be clear on what extra goods or services are provided, and include those costs in the main price displayed.

However, Case said that it frowns upon the use of pre-ticked boxes because consumers may be unaware of these costs or may need to retrace the steps when making their transactions.

It highlighted a case where a consumer bought a pair of shoes on a fashion retail website, and later noticed a recurring S$51.35 fee charged to her for four months. She soon discovered that she was auto-enrolled into a VIP membership for a fashion retail website without her knowledge when she bought her shoes.

PRICE COMPARISONS

The guidelines aim to stop businesses from inaccurately comparing their prices with those of their competitors to show that they have an advantage.

One example is an electronics store that advertised a pair of headphones for S$25 and stated that their competitor’s price was S$50. However, the actual price offered by the competitor was S$25, so there was no price advantage at all.

Businesses should not give fake information or mislead consumers when comparing their prices against their competitors, and the items compared should also be similar or the same.

They should conduct proper research and ensure that the comparisons are accurate, and not use refunds to absolve themselves of their responsibility.

Case noted that some electronic retailers offer “lowest price guarantees” when there are no price advantages or they are not the lowest. The terms and conditions of such guarantees are not disclosed or readily available to consumers.

It said that such practices are misleading and urged retailers to be more upfront in disclosing important terms and conditions more prominently.

DISCOUNTS

Discounts are price benefits made in comparison with the original price of the products, rather than with a competitor’s prices.

Businesses should use a price that has been used for a “reasonable amount of time”, and not increase prices before discounting a product, the guidelines state.

The duration of the sale and any terms and conditions should be clearly stated for consumers.

The amount that consumers can save from the discount should also be accurate.

One example CCCS gave was of a company that increased its prices the day before a sale so that the discount given seemed higher than it was.

USE OF THE TERM 'FREE'

Some suppliers use free gifts to entice consumers to buy products or services but have more conditions attached.

Businesses should ensure that using terms such as “free” or “S$0” is accurate and not misleading, the guidelines state.

Any terms and conditions or added costs that could be incurred later should be clearly stated for consumers.

The cost of the free gift, such as its cost price, should not be added to the price of the product or service. Other costs that could be incurred in relation to the item, such as shipping fees, should be clearly stated as well.

CCCS highlighted an example of a magazine publisher that offered new subscribers a “free” electronic tablet worth S$110 during a special promotion, but increased its subscription price by that amount, thus misleading consumers.

DEALING WITH OVERSEAS-BASED FIRMS

When asked about how CCCS will deal with online suppliers based overseas, Ms Wong said that Case has agreements with other jurisdictions.

“We're also on international platforms where we are learning and speaking to our other counterparts,” she said

The competition watchdog will continue to conduct checks on companies, while Case and the Singapore Tourism Board (STB) will continue forwarding complaints on errant practices from consumers to CCCS.

LAWS UNDER REVIEW

The CPFTA has been enforced by CCCS for more than two-and-a-half years, and was put in place to protect consumers against unfair practices.

MR Lee Cheow Han, assistant chief executive of legal, enforcement and consumer protection with CCCS, noted that there is “room for us to review our CPFTA administrations and look at additional statutory powers”.

One area under review is the possibility of imposing financial penalties, he said, and the agency is still looking at other areas where it can have better enforcement of the CPFTA.

For now, it will work with Case and STB to engage business and trade associations to spread the word about the new guidelines, Ms Wong said.

CCCs will also be working with e-commerce platforms, such as Lazada and Shopee, to reach out to smaller online retailers.

The full guidelines are available on CCCS’ website.