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Price matching is a common practice amongst UK e-commerce businesses. It involves matching the prices of competitors to remain competitive and attract customers. It is true that price matching can be a helpful strategy for UK online businesses. However, several legal pitfalls accompany this type of competitive pricing that your business should consider. This article will explore the problems of price matching with other online businesses.
1. Anti-Competitive Behaviour
Among the legal pitfalls of price matching is the potential for collusion or anti-competitive behaviour.
UK competition law prohibits businesses from colluding with competitors to fix prices or restrict competition. Price matching with competitors can be evidence of collusion. This is particularly true if:
- the prices are set at a certain level; or
- there is an agreement between companies to match prices.
Any breach of UK competition law can result in heavy fines and damage your company’s reputation.
2. Price Discrimination
Another legal pitfall of price matching is the potential for price discrimination. UK discrimination law prohibits businesses from discriminating against customers based on specific characteristics, such as gender or age.
Price matching could be seen as evidence of discrimination. Especially if specific customers are being offered lower prices than others and the reason for the price difference is not apparent. For example, suppose you offer over-50s higher prices when shopping for particular items. This might be discriminatory. Furthermore, news of this may harm your reputation and hurt existing customer loyalty.
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3. Intellectual Property (IP) Infringement
Price matching can lead to issues with IP rights. UK businesses are required to respect the IP rights of others, including trademarks and copyrights.
If your online business matches the prices of a competitor with a registered trademark or copyrighted material, it could infringe on their IP rights. As such, you should ensure that your pricing strategy is yours rather than one that copies the same price point for identical or similar products.
4. Contract Law Issues
Price matching can also lead to issues with contract law. UK businesses must comply with contract law, including the terms and conditions of contracts with supplies and customers.
Suppose an online business’s marketing strategy involves matching a competitor’s prices with a different set of terms and conditions. In that case, it could be breaching its own contracts and potentially exposing itself to legal action.
5. Misleading Advertising
Finally, price matching can sometimes constitute misleading advertising. If your online business advertises that it will match the price of a competitor’s product, you must ensure that the terms and conditions of the offer are clear and transparent.
For example, you can state that you will match any product’s price but, upon a potential customer identifying a lower price elsewhere, refuse to do so. To avoid this, you should identify all exclusions within a written price match policy.
Any failure to do so could result in complaints to regulatory bodies such as the Advertising Standards Authority (ASA), which could result in legal action against your business.
What Can My Business Do to Avoid These Risks?
To avoid these legal pitfalls, your online business should take several steps when engaging in price matching:
- Firstly, ensure it is not engaging in anti-competitive behaviour or collusion with competitors by conducting market research to ensure the prices being matched are based on market rates rather than being fixed by agreement with competitors;
- Secondly, ensure that price matching is not discriminatory by offering the same right to all customers or, alternatively, by providing clear and justifiable reasons for any price differences;
- Thirdly, you should ensure you are not infringing on IP rights by conducting research on the trademarks and copyrights of competitors and ensuring your products and services do not infringe on these rights; and
- Fourthly, you should comply with contractual obligations by reviewing the terms and conditions of your contracts with suppliers and customers and ensuring that any price matching does not breach those terms; and
- Finally, you should ensure that the terms and conditions within any advertising of ‘price matching’ are clear and transparent and are delivered to customers.
Key Takeaways
In conclusion, while price matching can be a helpful strategy for UK online businesses, it is essential to be aware of the potential legal pitfalls that can arise. In certain circumstances, price matching can lead to a race to the bottom in pricing, ultimately damaging your UK online business’s long-term sustainability and profit margins.
If you constantly reduce prices, you may not profit enough to invest in your company’s growth and development. Consequently, this can reduce the quality of your service and affect your company’s reputation and success.
Naturally, it is worth obtaining expert advice on the long-term sustainability of any price-matching practices to consider whether regularly reducing prices is the best strategy for growth and success. After all, sometimes the best price is not the lowest price.
If you need help guarding against unsafe price-matching practices, our experienced e-commerce and online business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
This type of pricing model is popular due to its success in persuading consumers that they are getting the best deal. However, some small businesses get into trouble using wide-scale exemptions (like refusing to match prices with items on ‘sale’ on other sites).
Yes, limiting your company’s price match strategy to applying to rival UK websites rather than retail stores or businesses in other countries is possible.
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