Carpetright and others warned by UK watchdog

Updated: Friday, 23 Aug 2013 15:03

Britain's competition watchdog has ordered six furniture and carpet retailers, including market-leading Carpetright, to stop misleading consumers by artificially ramping up the value of discounts during sales promotions.

The Office of Fair Trading has taken a tougher stance against retailers to ensure consumers can trust their prices and communications.

It acted against Britain's supermarkets on misleading prices last year and has the power to fine offenders 30% of relevant turnover.

Before a summer bank holiday weekend that is traditionally a busy trading period for home furnishing stores, the OFT said an investigation found the six firms were misleading customers into thinking they were getting a bargain.

They had artificially inflated reference prices on items to promote discounts that were not genuine, thereby infringing consumer protection laws. For a significant number of products, no sales at all took place at the higher price, the OFT found.

It has told the retailers to sign undertakings to cease the practice, giving them until autumn to respond. "If they respond positively and say they are going to change then that will be good. If not, we are prepared to take further action," an OFT senior director said.

The office did not name the retailers. But Carpetright, Britain's largest floor coverings retailer with a market share of over 25%, said in a statement to the stock exchange that it had received a letter from the OFT.

"Carpetright is co-operating fully with the OFT and will respond to the letter in due course. There is no suggestion in the letter of Carpetright having behaved in a manner which breaches competition law," it said.

Bed and mattress specialist Dreams has also been contacted by the OFT, a person familiar with the matter told Reuters.

Industry publication Retail Week said DFS Furniture, Furniture Village, ScS and Harveys/Bensons for Beds were the other retailers. All declined to comment.

The OFT said a practice known as "reference pricing" sees a retailer cite a higher artificial price when advertising the current price to demonstrate a product as being good value.

"These higher reference prices are applied to products with no expectation of the products selling at the higher price but are instead used to mislead customers into thinking that they are getting a bargain," it said.

During the period the OFT monitored the six firms, the overall average of sales at the reference price was 5%, while none took place on a significant number of products.

Earlier this week, Tesco, Britain's biggest retailer, was fined £300,000 sterling by a court for misleadingly pricing strawberries in 2011.