By Phillip Ngulube
The Zambian government liberalised the economy in 1991 in order to foster competition and growth in the economy. This growth led to many foreign and local companies being established, especially in the retail sector.
Competition in the retail sector has led to traders engaging in unfair trade practices such as misleading advertisements.
Traders engage in such unfair practices in order to maximise profits at the expense of consumer welfare. Traders lure unsuspecting consumers to their outlets by creating an illusion of lower prices which end up being false. These misleading advertisements have been detrimental to consumers in Zambia, whereby unsuspecting citizens are enticed into thinking that they are saving on promotional items when in actual sense they are not.
Today’s article focuses on three kinds of misleading price advertisements; misleading signage, double ticketing and drip pricing. Misleading signage may lead to consumers spending more than they planned to, resulting in them buying products which would not be the best for them. Misleading signage leads to time wasting, disappointment and regret. Misleading pricing is not only bad for the consumer, it is also bad for competition, and creates an uneven playing field in the market.
Misleading signage may best be described as the advertisement of prices that are not lowered but advertised as low. The misleading signage prices are advertised as having been reduced from a previous higher price by a certain discount and whereby the consumer would be saving by buying at the new advertised price. For example, a store may advertise that they have slashed prices of their bar fridges by 50 per cent to K500 from K750. A background check of that shop however, would indicate that it has actually been selling the same bar fridges before at a non-promotional price of K500. This therefore means that this store’s advertised promotion on the bar fridge in actual sense is not a promotion sale. They are simply misleading consumers into thinking that they are making a saving by buying the bar fridge during the promotion.
Another good example of misleading signage is the “buy 1 get 1 free” slogan. While it may be true that if a consumer pays the advertised price they would get two products, it is also true that the price advertised for the buy one get one free is actually the price of two of the same product. For example, one toothbrush could be selling at K5 while in the buy one get one free advert two toothbrushes are being sold at K10. In actual sense, a consumer is not getting a toothbrush for free but is merely paying the price for two.
Double ticketing is a form of deceptive pricing strategy that sells a product at the higher of two prices communicated to the consumer on promoting the product. For example, a suit in a retail store could have two price tags, one that is at K25 and another smaller one at K75. When a consumer sees the price at K25 which is bigger and highlighted, he may make the decision to purchase the item. However, upon presentation of the item at the till, he is informed that the suit is actually being sold at K75.
Drip pricing is a technique used by retailers of goods and services whereby a price that is advertised is not the final price paid for products or services. After the purchase is made, unavoidable and mostly hidden fees, taxes or charges, are incrementally disclosed or “dripped”. For example, roofing sheets are advertised on TV to be sold at K40 per meter by a particular roofing company. However, at the point of sale, the consumer is told to pay for 16 per cent value added tax separate from the advertised price. In the end, the actual price of the roofing sheets is more than the advertised price.
Some of the common effects of drip pricing include increased demand and perceived value of a product on promotion, reduction in consumers shopping around and comparing prices between different shops as well as the increased difficulty in comparing total prices because of the other hidden charges which are not disclosed beforehand. The purchasing decisions of consumers are mainly driven by who has the cheapest advertised prices. Therefore traders that drip their prices or advertise only a part of the price of a product are disadvantaging those firms that include all compulsory charges in the advertised price. In the example given earlier of roofing sheets, if company B advertises their actual final price at K45 per meter, a consumer may decide to buy from company A which advertised at K40 per meter. However, after company A adds taxes to the sale, the prices of company B would actually be cheaper. This is how this kind of advertising disadvantages consumers and competing companies.
According to Section 47 of Part VII of the Competition and Consumer Protection Act No. 24 of 2010 (the Act), “a person or an enterprise should not engage in false or misleading representation of any goods or services”. This provision encourages the provision of sufficient information to allow consumers to make informed decisions.
The drive for companies to increase profits leads businessmen and women to engage in activities that are detrimental to consumers all in the name of profit. It is the hope of the Commission that through its advocacy efforts, consumers may be made aware of how the may be misled. If you feel you have been misled in any manner including the ones described in this article, kindly lodge a complaint with the Commission.