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ASA ruling on misleading fees in auction advert

Thursday 01 November 2018

In a recent Advertising Standards Authority (ASA) ruling, Christie's were found to have misled bidders about auction fees payable.

A summary of the facts and findings is given below:

An online auction catalogue featured a disclaimer in small font at the bottom of the listing page stating "Other fees apply in addition to the hammer price - see Section D of our Conditions of Sale at the back of this Catalogue".

The complainant in the case believed that non-optional fees and taxes had not been made sufficiently clear and that the ad was misleading.

The ASA ruled that the ad breached the CAP Code (Edition 12) rules 3.1, 3.3 on misleading advertising and 3.17-3.19 on prices.

The ASA considered that ‘buyer’s premium’ and ‘VAT’ was material information that consumers needed in order to make an informed decision in relation to the auction. They said that the headline guide prices themselves within individual listings should have indicated that non-optional fees - such as the buyer’s premium (and the likely percentage charged), other applicable fees, and the rate of VAT applicable because not all buyers would pay no VAT or could recover VAT - were payable on top of the hammer price. They noted that this had not been the case in the Christies ad.

In addition, they did not consider that the qualification at the bottom of the listing pages – “Other fees apply in addition to the hammer price - see Section D of our Conditions of Sale at the back of this Catalogue” – on its own was sufficient.

They said that despite Christie’s comments that the font size of the qualification was the same size as the rest of the wording on the same page, they considered that it was quite small in relation to the layout of the page. They also noted that indicators, such as asterisks, had not been used near the guide prices to direct consumers to the bottom of the page where they would have been guided to additional information at the back of the catalogue. Consequently this information could have easily been overlooked by consumers.

The ASA also noted that the three different rates of buyer’s premium set out in the Conditions of Sale on page 138 of the catalogue were exclusive of VAT. Although the subsection concerning taxes, which followed the subsection about the buyer’s premium in the Conditions of Sale, stated that VAT might apply, they considered that reference alone was insufficient. Because not all buyers would pay no VAT or could recover VAT, they considered that the rates of buyer’s premium quoted should have been inclusive of the rate of VAT payable. They noted that this was not the case.

For the above reasons, the ASA ruled that the ad was misleading, and “must not appear in its current form again”.

Key lessons – what the ASA said

  • Quoted guide prices in future advertising for auction items or lots must make it clear that non-optional charges, such as buyer’s premium, any other applicable fees, and the likely rate charged, and applicable taxes such as VAT, were payable on top of the hammer price.
  • Any further detailed information about how charges and taxes were calculated must be adequately signposted
  • Quoted prices, such as buyer’s premium, must be inclusive of VAT, if not all of the buyers can recover VAT or pay no VAT.

The findings seem to indicate that auction houses should include VAT, buyer's premium, and any references to additional fees next to the auction estimates.  

This case illustrates how careful you need to be when giving information about additional charges and VAT; even with the best intentions it's possible to breach CAP guidance. This ASA ruling may come as a surprise to many, and if an auction house as prominent and well-resourced as Christie's can get it wrong - even after taking into consideration CAP Guidance, adding an additional disclaimer at the bottom of each page, and having a comprehensive guidance in a separate section of the catalogue - then so could any business.

Make sure you're familiar with the CAP Code (Edition 12) and the full details of this case to minimise a case being brought against your company.  

What's your opinion? Were the ASA right to rule in this way? Join in the Twitter conversation - @UK_nava #ASA Ruling

The sections of the Code that was breached

CAP 3.1 - Marketing communications must not materially mislead or be likely to do so.

CAP 3.3 - Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.

Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the  medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.

CAP 3.17 - Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication.

CAP 3.19 - If a tax, duty, fee or charge cannot be calculated in advance, for example, because it depends on the consumer's circumstances, the marketing communication must make clear that it is excluded from the advertised price and state how it is calculated.