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Trade descriptions and pricing

28 April 2005 by
Trade descriptions and pricing

Most traders and businesses are prevented from falsely describing their goods or services by the Trade Descriptions Act 1968, while the Consumer Protection Act 1987 prohibits them from misleading their customers on price.

But for those selling food or providing accommodation, a more complex and potentially confusing regulatory regime also applies. Non-compliance can result in criminal offences being committed by individuals as well as businesses.

The pricing of food and drink in establishments such as restaurants, cafés and hotels is governed by the Price Marking (Food and Drink on Premises) Order 1979, which is enforced through the Prices Act 1974. However, a new order comes into effect on 2 March 2004.

Where do I have to display my menu?

Eating areas (restaurants) and supply areas (fast-food outlets) are dealt with slightly differently. In the former, a menu must be clearly displayed at or near the entrance so that customers can look at it before they enter the eating area.

If food is served from a counter, the menu should be clearly displayed at the counter and should be visible from or separately displayed outside the counter area. This should make sure that customers can decide whether they want to buy anything before they are in a position to be served.

What prices do I have to display?

There are strict rules covering prices on menus. The general obligation is to list prices for all food sold, either by individual item or by "meal" depending on how the food is sold.

But if a restaurant sells a wide variety of food (more than 30 items) it must display prices for a minimum of 30 items. Furthermore, if it breaks down the menu items into categories (eg, starter, main course, dessert) it must display prices for at least five of each.

The Price Marketing (Food and Drink Services) Order 2003 states that an establishment supplying five types of soft drinks or fewer must indicate the price for each drink. If more than five types are supplied, the price must be supplied for at least five. A soft drink is defined as any non-alcoholic drink of a kind that is served cold.

The 2003 order has also amended the requirements relating to wine. Likewise, if five types of wine or fewer are supplied, a price must be given, and if more are supplied, no fewer that five prices must be given.

It is difficult to imagine circumstances where you would not price every item on a menu, as any misleading indication as to price (which the lack of a price might amount to) is an offence under the 1974 Act.

If you are charging VAT then it must be included in the price. If you add a service charge (either as a fixed sum or a percentage of the bill) or if there is a minimum cover charge, this must be clearly displayed - at least as prominently as the price of the food to which the charges relate.

How much information do I have to give about my food?

Catering outlets do not have to comply with the Food Labelling Regulations 1996, which require all ingredients to be listed, but if the food has been irradiated, consumers must be informed.

It is common sense for restaurateurs and others to make sure that customers are aware of ingredients that commonly cause harm or allergic reactions.

What are the rules governing hotels?

Hotels (defined as any establishment in Great Britain at which sleeping accommodation is provided by way of trade or business) must comply with provisions set out in the Tourism (Sleeping Accommodation Price Display) Order 1977.

This states that room prices must be prominently displayed at the hotel reception (or at the entrance if there is no reception). The price list must state the nightly charge, including any service charge, for a single bedroom, a twin or double bedroom or any other accommodation - for example, dormitories or multiple occupancy rooms.

If VAT is payable it must be included in the price or the VAT payable must be displayed as prominently as the price.

If room prices vary (midweek and weekend rates), then at the very least the maximum and minimum prices for each type of room must be stated. Any meals included in the price must also be clearly identified and stated as being included.

Failure to comply with any of the above provisions amounts to an offence under the 1974 Act.

The Trade Descriptions Act 1968 prohibits the making of false or misleading statements in relation to the provision of goods, services, facilities or accommodation. This regime therefore captures the hotel and catering industry and means that descriptions provided in any form - be it on menus, in brochures or advertisements -must be checked for accuracy. This is particularly the case where changes are made that would make previous statements or advertisements misleading.

Food and rooms must be clearly described and customer queries answered accurately to ensure that they are not misled as to the goods or services they are buying.

What are the penalties for breaking the law?

Offences of the sort described are enforced by local Trading Standards Authorities. Trading standards officers have the power to enter business premises and inspect goods, documents and procedures; power to require information and assistance; power of search (if necessary under warrant) and seizure of documents. They can also enter premises to make test purchases and to check food or accommodation is correctly described and priced.

If they decide to prosecute, there is no need for them to prove any criminal intent, recklessness or negligence. But a defence of due diligence can be used in most cases. In order to rely on this defence, a defendant must show on the balance of probabilities that an offending action was a mistake, was due to reliance on information supplied to him, or was the result of something another person did or failed to do, and that he took all reasonable precautions and exercised all due diligence to avoid breaking the law.

Offences typically carry a maximum fine at the magistrates' court of £5,000 each. Unlimited fines may be imposed at the crown court.

So it's a minefield?

It certainly can be. The first step is to get to grips with the legal requirements. The next step is to identify whether systems that are in place meet the legal requirements - if not, you may not be able to claim due diligence. The final step is to ensure that systems are monitored and operate on a day-to-day basis as they should do. For some larger organisations that may mean training and education.

Breaking the law can have devastating effects, not only in terms of financial sanctions (including personal liability) but also in terms of damage to a reputation that may be the hotelier or caterer's greatest asset.

by Tristan Meears-White - and Rachael Hardwick
Tristan Meears-White is an associate in the regulatory group at lawyers DLA. Rachael Hardwick is a solicitor at DLA.

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