The Competition and Consumer Commission of Singapore (CCCS) has published its Guidelines on Price Transparency that set out how it interprets the Consumer Protection (Fair Trading) Act (CPFTA) and, in particular, what is an “unfair practice” under section 4 of the CPFTA.
The guidelines, which will be effective from 1 November 2020, examine common pricing practices that may mislead consumers and infringe the CPFTA, and include actions that suppliers should take to ensure that prices and their accompanying terms and conditions are accurate and communicated clearly.
Given that each industry is unique, the guidelines, which were issued on 7 September 2020, provide broad principles and examples for illustration. Suppliers may consider getting a legal review of whether their practices are in line with the guidelines, considering their industry’s uniqueness.
The CPFTA applies to all suppliers who engage in consumer transactions in Singapore, both online and offline, or based in Singapore or overseas. Therefore, the guidelines would apply to all of these suppliers as well.
Suppliers should note that the guidelines are not a substitute for the CPFTA and its regulations.
The CPFTA in general states that “[i]t is an unfair practice for a supplier… (a) to do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled [or] (b) to make a false claim”.
Without limiting the generality of the above, there are 27 existing specific unfair practices listed in the second schedule to the CPFTA. Some of these unfair practices are relevant to the issue of price transparency, such as:
Unfair Practice #7 – “Representing that a price benefit or advantage exists respecting goods or services where the price benefit or advantage does not exist.”
Unfair Practice #8 – “Charging a price for goods or services that is substantially higher than an estimate provided to the consumer, except where the consumer has expressly agreed to the higher price in advance.”
Unfair Practice #17 – “Offering gifts, prizes or other free items in connection with the supply of goods or services if the supplier knows or ought to know that the items will not be provided or provided as offered.”
Unfair Practice #18 – “Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period.”
Unfair Practice #20 –“Omitting to provide a material fact to a consumer, using small print to conceal a material fact from the consumer or misleading a consumer as to a material fact, in connection with the supply of goods or services.”
Unfair Practice #22 – “Purporting to assert a right to payment for the supply of unsolicited goods or services.”
In the guidelines, the CCCS had singled out practices observed in the industry which it considers to constitute the unfair practices listed above.
“Drip pricing” refers to the practice of advertising a product or service at a lower headline price (that is, displayed and advertised) than the final price that a consumer would pay. The increase in total price is usually a result of disclosing additional mandatory or optional fees and charges during the transaction and payment process.
With respect to mandatory fees, an example of a mandatory fee would be a compulsory cleaning fee for a hotel, as well as ay surcharges, service fees or taxes.
With respect to optional fees, CCCS took issue in particular with the common drip-pricing practice of having pre-ticked checkboxes to purchase additional goods or services. In cases of pre-ticked boxes, consumers would have to uncheck or opt-out of the pre-selection if they do not wish to purchase that good or service.
CCCS’ position is that suppliers should ensure that any representations and price comparisons with other suppliers’ prices or the use of terms such as cost price are not false or misleading. In order to reflect prices truthfully, suppliers should conduct their own research, which should include comparing prices of goods or services that are accepted to be similar or equivalent by consumers or trade norms.
The regulator also indicated that it would consider the comparison of prices of products of different specifications as not fair (for example, comparing older and newer models of inkjet printers). There remains some ambiguity on how much suppliers are permitted to compare between different products that are not like-for-like comparisons.
Discounts are price benefits arising from a supplier’s comparison to its usual price, rather than against other suppliers’ prices.
CCCS’ position is that when suppliers offer a discount and/or make comparisons with a previous price (for example, through strikethrough pricing) to represent a price benefit, they should use a bona fide previous price to provide a basis for the price comparison so that consumers are not misled by the savings they may achieve from purchasing the discounted product or service.
The principle is that there should actually be a price benefit: for instance, it would be misleading if a supplier sells a packet of instant noodles at $6 and advertises a buy-one-get-one free promotion, when each packet is normally sold at $3.
CCCS’ position is that suppliers should ensure that any representation that the price is $0 or “free” is not false or misleading. Any qualifiers, terms and conditions, and subsequent or deferred charges should be stated in a clear and prominent manner together with the “free” representation. Furthermore, when a product or service is part of the package price, suppliers must not represent that the particular product or service is free. The free item should genuinely be additional to what is being sold.
Notably, CCCS has also taken the position that when a good or service is free, the price of another accompanying or subsequent good or service should not be increased to cover it (or have its quality or quantity decreased).
Osborne Clarke comment
In general, the guidelines are a welcome explanation of how CCCS would interpret the unfair trade practices scheduled in the CPFTA.
However, in some ways, the guidelines are also an expansion of the general definition of an unfair practice in section 4 of the CPFTA of what it means for a supplier “to do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled”. The standards or principles that the guidelines hint at may be of broader application beyond the specific area of price transparency. For instance, CCCS’ position in the context of free gifts and trials is that: “[s]uppliers should ensure that the price of a product/service is not increased to cover the cost of a free gift/trial… Suppliers should not try to recover costs by reducing the quantity, quality or composition of the product/service.” This may be of some news to suppliers as it is a matter of business logic that the products or services will subsidise the cost of free gifts and trials. Regardless, CCCS had made its high standards clear in indicating a strong preference for consumer rights.
Suppliers will need to exercise caution given that under section 18A(1) of the CPFTA, where there is a dispute between a supplier and a consumer, the supplier bears the burden of proving that he or she has not committed an unfair practice.
A thorough legal review of existing compliance with the CPFTA would be prudent in line with the CCCS’ widening stance.