* Six furniture, carpet retailers misleading consumers - OFT
* Says using artificial reference prices in sales promotions
* Carpetright, Dreams contacted by OFT
* DFS, Furniture Village, ScS, Harveys warned - report
* British Retail Consortium irked by OFT warning
By James Davey
LONDON, Aug 23 Britain's competition watchdog
ordered six furniture and carpet retailers, including
market-leading Carpetright, to stop deceiving
consumers by artificially ramping up the value of discounts
during sales promotions.
The Office of Fair Trading (OFT) 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 percent of relevant turnover.
The OFT said on Friday an investigation found the six firms
were misleading customers into thinking they were getting a
The timing of the warning, on the eve of a summer bank
holiday weekend that is traditionally one of the busiest times
of the year for home furnishing stores, irked industry body the
British Retail Consortium (BRC), which also said the OFT may
have breached its own guidelines.
The OFT said the retailers 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, its probe 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," OFT senior director Cavendish Elithorn told BBC Radio
The OFT did not name the retailers.
Carpetright, Britain's largest floor coverings retailer with
a market share of over 25 percent, said it had received a letter
from the OFT. Its shares fell as much as 3 percent.
"Carpetright is cooperating 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.
On Friday, the firm's website was advertising its "Crazy
weekend" sale with 60 percent reductions for carpets and beds.
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 warned. All declined to comment.
BRC Director General Helen Dickinson said the OFT's
deadlines were "totally impractical" and expressed concern about
an "apparent lack of process and consultation" in its
investigation. She plans to raise concerns on behalf of the
whole sector with OFT chief executive Clive Maxwell.
"In addition we will be asking for an explanation about what
could be two breaches of its own guidance which state that: 'It
should not be assumed that any breach of consumer protection
legislation has occurred' and that the 'the OFT cannot advise if
a business is being investigated.'"
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 percent,
while none took place on a significant number of products.
Earlier this week, Tesco, Britain's biggest
retailer, was fined 300,000 pounds ($467,200) by a court for
misleadingly pricing strawberries in 2011.