Price Transparency Guidelines by CCCS (With Examples)
As a business owner or supplier, it is natural for you to want to set your prices as high as possible to ensure profitability. However, increasing your profits should not come at the expense of misleading consumers about your prices.
Unfair pricing practices may also result in legal consequences that may damage you and your business’ reputation. It is therefore important that you are aware of what may constitute unfair pricing practices and price your products or services fairly instead.
The Guidelines on Price Transparency established by the Competition and Consumer Commission of Singapore (CCCS) seek to help suppliers in Singapore better understand the pricing practices that could potentially infringe the Consumer Protection (Fair Trading) Act (CPFTA). This article will explain:
What are the Guidelines on Price Transparency?
The Guidelines on Price Transparency set out how the CCCS will interpret the CPFTA when deciding whether a pricing tactic constitutes an unfair practice. According to the guidelines, which came into effect on 1 November 2020, there are four pricing practices that may constitute unfair practices, and these will be covered in more detail below.
The guidelines are not law and should not be mistaken as a substitution for the CPFTA and its regulations. However, it is important for suppliers to comply with the guidelines, as engaging in unfair pricing practices can result in legal consequences such as:
- Being sued by consumers for unfair practices
- Having an injunction order imposed against their business to restrain it from further engaging in unfair practices
The Guidelines on Price Transparency also suggest good practices of fair pricing that suppliers are recommended to adopt to prevent potential disputes with consumers. A copy of the guidelines can be found here.
Who Needs to Comply With the Guidelines on Price Transparency?
All suppliers that sell to consumers in Singapore must comply with the Guidelines on Price Transparency, regardless of whether they operate online or offline. Under the CPFTA, a supplier is defined as a person who, in the course of their business:
- Provides goods or services to consumers;
- Manufactures, assembles or produces goods;
- Promotes the use or purchase of goods or services; or
- Receives or is entitled to receive money or other consideration as a result of the provision of goods or services to consumers.
Following from this definition, only suppliers who transact in business-to-consumer (or “B2C”) transactions, and not business-to-business (or “B2B”) transactions, are required to comply with the guidelines. The guidelines also apply to overseas suppliers, as long as they sell to consumers in Singapore.
The 4 Key Pricing Practices in the Guidelines on Price Transparency
1. Drip Pricing
Drip pricing is the practice of advertising a product or service lower than its headline (i.e. advertised/displayed) price. Drip pricing may constitute unfair practice if additional charges (whether mandatory or optional) are not disclosed to consumers in a prominent manner.
For example, some suppliers may use pre-ticked boxes to pre-select extra products or services that will be added on to a consumer’s order unless they opt out. However, if the existence of these pre-ticked boxes is not clearly communicated to the consumer, the consumer may fail to notice them or opt out of these extra products or services. As a result, the consumer may end up paying for these additional items that they may not have wanted.
Another example of drip pricing can be seen in this case of a Vietnamese tourist who was not made aware of additional warranty charges when purchasing an iPhone 6 that he had hoped to gift his girlfriend.
The Vietnamese tourist had opted for a one-year warranty for the iPhone when asked to choose between a one or two year-warranty. He was under the impression that the one-year warranty was complimentary as the shop employees did not mention that there would be additional charges for it. It was only after signing the mobile agreement that he was told to pay an additional $1,500 for the one-year warranty.
Under the Guidelines on Price Transparency, drip pricing may potentially constitute unfair pricing and infringe the CPFTA if suppliers charge a substantially higher price than the advertised price, omit and conceal material facts about the price of an item, or charge consumers for items that had not been sufficiently brought to their attention. In view of such cases, the CCCS encourages suppliers to adopt these fair practices instead of using drip pricing:
Use “opt-in” or “opt-neutral” approach
This means to allow consumers to subscribe to (“opt-in”), accept or reject (“opt-neutral”) add-ons. By doing so, consumers will be more aware of the additional products and services and be better able to choose whether they actually want them.
If pre-ticked boxes must be used, hyperlinks to the supplier’s terms and conditions should be displayed along with the pre-ticked boxes so that such terms and conditions are known to a consumer.
The hyperlinks should be placed in an appropriate position that is noticeable to consumers, and a constant style of the hyperlinks should be used so that consumers know when a link is present. The label of the hyperlink should also properly convey the nature and relevance of the information it links to.
Make known additional mandatory charges
Additional mandatory charges such as GST charges should also already be included in a product’s or service’s headline price. If such additional charges cannot be reasonably calculated beforehand, these charges should be clearly shown together with the headline price.
For example, when prices are shown in Singapore Dollars but the supplier deals in a foreign currency, cross border fees may apply. Such suppliers should clearly disclose that consumers will be entering into a cross-border transaction, and indicate additional mandatory fees for such a transaction in an itemised bill.
In addition, if the product is sold in a physical store, then the supplier should state clearly such mandatory charges before the consumer enters into a transaction.
Present a final itemised price list
A final itemised price list should be presented to consumers, and it should clearly reflect and break down all additional mandatory and optional fees before they make payment. This gives the consumer an opportunity to notice and opt out of additional optional products or services that they are not interested in purchasing.
2. Price comparison
Price comparison refers to suppliers comparing their prices to a competitor to show a better deal or by claiming that they have the “best” price in Singapore. Under the Guidelines on Price Transparency, however, such comparison should not be false or misleading, and the prices used in comparison must be accurate. Suppliers also should not omit or conceal material facts when making a price comparison.
An overseas example of misleading price comparison can be seen in an advertisement by German supermarket chain Aldi, which compared 2 baskets of goods to a competitor’s, using the difference in price to claim that Aldi’s prices were better on average. However, it was found that the comparison was misleading as Aldi’s prices were actually not better on average. In addition, it was discovered that Aldi omitted and concealed material facts when doing their comparison, by selectively comparing products that would skew the price comparison in their favour.
Under the Guidelines on Price Transparency, a supplier has the responsibility to regularly conduct research and compare their prices to only similar or identical products or services. Offering to provide a refund if the price comparison is untrue does not dispense with the need and responsibility of the supplier to ensure that adequate research has been done to ensure that the prices reflected are not false or misleading.
To ensure fair price comparisons, the guidelines recommend that suppliers keep a record and regularly update reference prices used. They should also compare prices of only similar or identical goods or services.
Discounts are a price comparison with the supplier’s usual pricing to show cheaper prices. Common methods of showing discounts include using:
- Strikethrough pricing (e.g. $50 $40)
- Percentage reduction (e.g. 20% off)
- Qualifying terms for the percentage reduction (e.g. at least/up to 50% off)
While suppliers are allowed to offer discounts, a misrepresentation of a discount or duration of the sale terms may be an infringement of the CPFTA. An example of misrepresentation of a discount is the case of retailers ABC Bargain Centre, Valu$ and ABC Express. They had to stop advertising their “Fire Sale” and “Closing Down Sale” as they were in fact, not closing down and their prices were not cheaper in comparison to their usual prices.
Their advertisements were also displayed with no time period stated, which could have misled consumers into thinking that the sale was only for a limited period of time.
Another example of a supplier that provided misleading discounts would be the online travel platform Expedia Singapore. They were forced to take down advertisements of their daily deals, which they had claimed would end by 11.59pm each day. However, the prices remained the same after midnight.
When offering discounts, suppliers are encouraged to adopt these good practices:
- Use legitimate discount prices, i.e. when making comparisons to usual/previous prices, suppliers should ensure that the previous price had already been offered for a reasonable period
- Record evidence of past sales and prices so that the usual retail prices can be compared with the discounted prices, to show that the supplier’s discounted prices are fair
- Ensuring the time period of the discount or sale is not misleading by stating clearly the time period for which the discount is valid
4. Use of the term “free”
It is a popular practice for suppliers to give out free products/services to entice consumers into trying them, which may lead these consumers to actually buying them. However, suppliers must make sure that any free or $0 products/services are not represented in a false or misleading way.
For example, if a product or service is being offered on a “free trial” service, an unscrupulous supplier may hide important details, such as having a specific period to receive, evaluate and return the product to avoid being charged, in the fine print of the advertisement that promotes that product or service.
Additionally, the same hidden information may provide that by accepting the free trial, consumers are deemed to subscribe to a monthly shipment of the products and will be charged accordingly. Moreover, it is usually difficult for consumers to contact the supplier to stop recurring charges, halt shipments or get refunds.
A good practice that the CCCS recommends suppliers adopt when offering free products/services is to notify consumers of any limited time period during which the product, service is free. Any qualifiers, terms and conditions and/or subsequent or deferred charges should be clearly stated in the advertisement of the free product, service or trial.
Suppliers that offer free trials should also provide consumers with clear information on the subsequent charges after the free trial, and the process of cancelling the product or service should consumers decide not to continue using it after the free trial has ended.
What Can Singapore Consumers Do If They Find a Supplier’s Pricing to be Unfair?
Lodge a complaint with the Consumers Association of Singapore (CASE)
CCCS does not handle pricing disputes between consumers and suppliers. Consumers may reach out to CASE regarding their disputes and CASE will help assist consumers to obtain redress, and in some cases, compensation through negotiation or mediation. You may contact CASE at 6100 0315 or visit their website.
However, if the supplier continues to persist with unfair pricing methods, CASE can refer the supplier to CCCS for further investigations. The CCCS may then apply for a court order (known as an injunction) to compel the supplier to cease its unfair pricing.
Sue the supplier
Under the CPFTA, a consumer may sue a supplier for engaging in unfair practices if:
- The amount of the claim does not exceed $30,000; or
- There is no claim for money, and
the subject matter which relief is sought for exceeds $30,000.
You may refer to our other article for more information on consumer rights in Singapore.
The Guidelines on Price Transparency provide general principles on fair pricing that should be followed to ensure that your business is not in breach of the CPFTA. It is important that you, as a supplier, avoid engaging in unfair pricing practices to prevent misleading consumers and avoid possible damage to you and your business’ reputation.
If you have any concerns or queries regarding your price transparency obligations in Singapore, consider consulting a litigation lawyer. A litigation lawyer can provide legal advice regarding compliance with the CPFTA and help evaluate if your pricing practices are fair.
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