[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Office of Fair Trading v The Officers Club Ltd & Anor [2005] EWHC 1080 (Ch) (26 May 2005) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/1080.html Cite as: [2005] EWHC 1080 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		26 May 2005

Index

Introduction	1-3
The central issue	4-5
Background Facts	6-25
The legal context	26-54
The Directive	26-28
The Regulation	29-34
Part 8 EA 2002	35-42
Consumer Protection Act 1987	43-46
The Code	47-49
Trading Standards Departments	50-54
Foreign regulatory codes and jurisprudence	55-65
US	57-60
Canada	61-63
New Zealand	64-65
Witnesses	66-67
The OFT's case	68-75
TOC's case	76-109
Analysis	110-186
Relief	187-191
Decision	192-193

Mr Justice Etherton :

Introduction

1. In these proceedings the Office of Fair Trading ("the OFT") seeks an order, pursuant to the Control of Misleading Advertisements Regulations 1988 SI 1988/915 ("the Regulations") and the Enterprise Act 2002 ("EA 2002"), restraining the Defendants from publishing advertisements which the OFT claims are misleading.
2. The First Defendant, the Officers Club Limited ("TOC") operates, in addition to other retail outlets with which these proceedings are not concerned, a chain of stores known as "The Officers Club", "Blakes Menswear" and "Petroleum" ("TOC's stores"), all of which sell garments and accessories to the public. It has approximately 146 such stores nationwide.
3. The Second Defendant, David Charlton ("Mr Charlton") was the founder of TOC. He has been at all relevant times a director of TOC, and is the owner of its entire issued share capital.

The central issue

4. Until recently TOC operated a "70% off" sales strategy, under which all goods were initially marketed at "Red Star" prices in a very limited number of TOC's stores for 28 days and were then sold throughout all or most of TOC's stores at a 70% discount off the "Red Star" prices.
5. The issue which has been tried before me, following an order for an expedited hearing, is whether TOC's advertisements promoting its "70% off" sales strategy were misleading and, hence, unlawful under the Regulations and EA 2002. Other issues in the proceedings have been stayed by order of Lindsay J made on 3 November 2004.

Background Facts

6. Following a visit to the United States in 1992, where he was impressed by businesses selling to the public a high volume of goods discounted from a higher price, Mr Charlton purchased TOC as a shelf company. TOC began trading with a single store in Sunderland.
7. TOC is now a very substantial enterprise. It has over 2000 employees and an annual turnover of some £100m. For the year ending August 2004 TOC recorded some 5.8 million transactions, in which 9.9 million items were sold.
8. TOC operated its "70% off" strategy from January 1993 until June 2004. In that respect, TOC was a market leader.
9. In very broad terms, that strategy was implemented in the following way.
10. The products sold in TOC's stores are TOC's "own brand", ordered from suppliers in the United Kingdom and usually manufactured in the Far East. Small numbers of "full price" items, labelled "Red Star" items, were delivered to TOC by its suppliers in advance of the bulk of the goods. The "Red Star" items were sold for 28 days in a relatively small number of TOC's stores. In recent years 19 of the stores were earmarked to sell "Red Star" items. Usually, only a small proportion of those 19 stores sold a particular line at the "Red Star" prices. During the 28 day period or shortly afterwards bulk supplies of the goods were delivered to TOC. Immediately after expiry of the 28 days (or, if later, on delivery of the bulk) those goods were offered for sale in TOC's stores at the "70% off" price, and the "Red Star" items were reduced to the same discounted price.
11. TOC placed advertisements in each of its stores promoting and explaining the "70% off" sales strategy.
12. "70% off everything" advertisements were typically displayed on large window signs and posters within the stores, as well as by way of other in-store advertising material. Labels on shelves and on the garments were marked with corresponding "was" and "now" prices.
13. A representative example of the "70% off" advertisements was the signage displayed on 6 September 2001 in TOC's Kingston store:

(a) In the windows posters announced:

"70% off"

EVERYTHING

OFFER EXCLUDES "RED STAR" ITEMS

(b) Inside the store, hanging signs stated:

"70% off" EVERYTHING

TICKET PRICE		YOU PAY
£2.99 £9.99 £19.99		£0.90 £3.00 £6.00
£29.99		£9.00
£39.99		£12.00
£49.99		£15.00
£99.00		£30.00
£299.99		£90.00

DISCOUNT GIVEN AT TILL

(c) A "Petroleum, Enzym" long sleeved T-shirt was advertised both on the shelf edge marker and on the garment's price tag as "Was £29.00, You pay £9.00, "70% off" everything".

(d) A sweatshirt was advertised on a swing tag as "Was £39.99 You pay £12.00".

(e) Jerseys were displayed with tag and shelf edge labels stating "Was £34.99, You pay £10.50".

(f) There were also notices stating:

"All discounted goods have been for sale at the higher price at six or more of our branches for a minimum of 28 days in the preceding six months."

14. As I have said, the large majority of goods (whether measured by number or sales value) sold by TOC were goods exposed for sale at a price lower than the price at which such goods had previously been offered.
15. By way of example, on 31 May 2003 only 19 of TOC's 159 stores offered "full price" items. None of those 19 stores offered more than 0.36% of its stock at the full price, none offered more than 3 styles at the full price, and none offered more than 2 sizes of a particular style at the full price. Three of the stores stocked a total of only 4 individual items at the full price, constituting respectively 0.05%, 0.04% and 0.05% of those stores' total stock.
16. It is common ground that the position as at 31 May 2003 provides a fair reflection of the position generally.
17. During the period from 1 September 2002 to 28 June 2003, only 0.15% of the total number of items sold in TOC's stores were at the "full price"
18. The Kingston store did not either on 6 September 2001 or on 31 May 2003 offer any "full price" items.
19. It is common ground, as illustrated by those facts, that TOC's standard prices were in fact those marketed as being "70% off".
20. The OFT began investigation of TOC's "70% off" strategy following a number of complaints referred to it by Trading Standard Departments ("TSDs"). The complaints, which emanated from 10 TSDs across the country, and which included details of complaints from 9 individual consumers, cover the period of time between about 4 December 1999 and 5 December 2003. They fall into three main categories: (1) complaints regarding the "70% off" advertisements, (2) complaints regarding store closure and stock clearance type advertisements and (3) complaints about the combination of the "70% off" advertisements with other promotional advertisements such as store closure and store clearance advertisements.
21. Discussions and correspondence between the OFT and TOC took place from 26 April 2002 until February 2004, during which the OFT sought to obtain undertakings or assurances from TOC in relation to all three categories of advertisements about which complaint had been made.
22. By December 2003, the position was that broad agreement had been reached on assurances relating to the complaints in the second and third categories mentioned above, and TOC had announced it was abandoning the "70% off" everything" strategy. TOC refused, nonetheless, to sign the assurances sought by the OFT, to which TOC had objections on legal and commercial grounds.
23. A letter before claim was sent by the OFT on 19 December 2003. After a further unsuccessful meeting between the parties on 27 January 2004 the present proceedings were commenced on 1 March 2004.
24. TOC has now ceased its "70% off" marketing strategy. It was phased out from the beginning of 2004. TOC now displays all its goods in all its stores at an initial flat price without deduction. TOC has stated to the OFT that it has no present plans to use the "70% off" strategy again, but it wishes to reserve its right to do so if, and so long as, such strategy is lawful, and if, and so far as, it is desirable to do so in order to compete with other retailers, including, in particular, traders who employ a similar strategy.
25. Following certain assurances given by TOC to the OFT in October 2004, Lindsay J, as I have said, granted a stay of all issues other than the issue whether TOC's advertisements promoting the "70% off" strategy were misleading and unlawful.

The legal context

The Directive

26. The Regulations implement Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising (the "Directive").
27. The Directive, in its preamble, noted that the Members States' laws against misleading advertising differed widely (recital 1) and that it was necessary to establish "minimum and objective criteria" for determining whether advertising was misleading (recital 7).
28. Those minimum criteria were set out in Article 2.2 of the Directive, which specified that:

"'misleading advertising' means any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor".

The Regulations

29. The Regulations implement the Directive. They came into force on 20 June 1988.
30. Reg. 2(2) of the Regulations closely follows Article 2.2 of the Directive. It defines a misleading advertisement as follows:

"For the purposes of these Regulations an advertisement is misleading if in any way, including its presentation, it deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and if, by reason of its deceptive nature, it is likely to affect their economic behaviour or, for those reasons, injures or is likely to injure a competitor of the person whose interests the advertisement seeks to promote."

31. Reg. 5(1) of the Regulation provides that, if, having considered a complaint about an advertisement, he considers that the advertisement is misleading, the Director General of Fair Trading ("the Director General") may, if he thinks it appropriate to do so, bring proceedings for an injunction against any person appearing to him to be concerned or likely to be concerned with the publication of the advertisement.
32. Reg. 6(1) of the Regulations provides that, on an application by the Director General, the Court may grant an injunction on such terms that it may think fit, but (except where it grants an interlocutory injunction) only if the Court is satisfied that the advertisement to which the application relates is misleading. The Regulation further provides that, before granting the injunction, the Court shall have regard to all the interests involved and in particular the public interest.
33. Reg. 6(2) of the Regulations provides that an injunction may relate not only to a particular advertisement but to any advertisement in similar terms or likely to convey a similar impression.
34. The OFT, which was established by s.1 of EA 2002, has taken over the previous functions of the Director General: EA 2002 s.2.

Part 8 EA 2002

35. In addition to the OFT's duties and powers under the Regulations, a further and alternative set of enforcement provisions is contained in Part 8 of EA 2002 ("Part 8"). Part 8 provides a unified enforcement regime for certain specified consumer legislation, covering both domestic infringements and so-called "Community infringements". Part 8 replaced the provisions of Part III of the Fair Trading Act 1973, which governed persistent breaches of relevant domestic law, and the Stop Now Orders (EC Directive) Regulations 2001 ("SNORs"), which governed Community infringements.
36. In the present case, the OFT relies on the provisions concerning Community infringement. A Community infringement is defined in EA 2002 s.212 (1), which provides so far as material:

"In this Part a Community infringement is an act or omission which harms the collective interests of consumers and which –

(a) contravenes a listed Directive as given effect by the laws, regulations or administrative provisions of an EEA State…"

37. EA 2002 s.212(3) provides that the Secretary of State may by order specify for the purposes of the section the law in the United Kingdom which gives effect to the listed Directives.
38. The Directive is a listed Directive: EA 2002 s.210(7) and schedule 13. The relevant provisions of the Regulations have been specified by the Secretary of State as giving effect to the Directive: Enterprise Act 2002 (Part 8 Community Infringements Specified UK Law) Order 2003 SI 2003/1374.
39. Accordingly, if a contravention of the Regulations harms the collective interests of consumers, it is a Community infringement under EA 2002.
40. The OFT has power under EA 2002 ss.213(1) and 215(2) to apply for an enforcement order in respect of an infringement under Part 8.
41. EA 2002 s.217 provides that the Court may make an enforcement order against a person named in the application if the Court finds that the person has engaged, or is likely to engage, in conduct which constitutes an infringement: EA 2002 s.217(1) and (2).
42. EA 2002 s.222(2) provides that, if the person whose conduct constitutes a Community infringement is a body corporate, and the conduct takes place with the consent or connivance of a person, "an accessory", who has a special relationship with the body corporate, the latter's consent or connivance is also conduct which constitutes the infringement. A person has a special relationship with a body corporate if he is (a) a controller of the body corporate, or (b) a director, manager, secretary or other similar officer of the body corporate or a person purporting to act in such a capacity: EA 2002 s.222(3). It is common ground between the parties that, if TOC has committed a Community infringement, Mr Charlton has also committed an infringement as an accessory.

Consumer Protection Act 1987

43. In addition to the civil law provisions in the Regulations and Part 8, to which I have referred, Part III of the Consumer Protection Act 1987 ("the CPA") creates a criminal offence where, in the course of any business of his, a person gives (by any means whatever) to any consumers an indication which is misleading as the price at which any goods are available.
44. Sections 20 and 21 of the CPA, so far as relevant, are as follows:

"20 – Offence of giving misleading indication

(1) Subject to the following provisions of this Part, a person shall be guilty of an offence if, in the course of any business of his, he gives (by any means whatever) to any consumers an indication which is misleading as to the price at which any goods, services, accommodation or facilities are available (whether generally or from particular persons).

(2) …

(3) …"

"21 – Meaning of "misleading".

(1) For the purposes of section 20 above an indication given to any consumers is misleading as to a price if what is conveyed by the indication, or what those consumers might reasonably be expected to infer from the indication or any omission from it, includes any of the following, that is to say –

(a) …

(b) …

(c) …

(d) …

(e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are.

(2) For the purposes of section 20 above, an indication given to any consumers is misleading as to a method of determining a price if what is conveyed by the indication, or what those consumers might reasonably be expected to infer from the indication or any omission from it includes any of the following, that is to say-

(a) that the method is not what in fact it is;

(b) …

(c) …

(d) …

(e) that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are.

(3) For the purposes of subsections (1)(e) and (2)(e) above a comparison is a relevant comparison in relation to a price or method of determining a price if it is made between that price or that method, or any price which has been or may be determined by that method, and –

(a) any price … which is stated or implied … to have been … attributed to the goods… in question…

(b) …"

45. Section 25(1) of the CPA provides that Secretary of State may, after consulting the OFT [formerly the Director General] and such other persons as the Secretary of State considers it appropriate to consult, by order approve a code of practice issued (whether by the Secretary of State or another person) for the purpose of -

"(a) giving practical guidance with respect to any of the requirements of section 20 …; and

(b) promoting what appear to the Secretary of State to be desirable practices as to the circumstances and manner in which any person who gives an indication as to the price at which any goods, services, accommodation or facilities are available or indicates any other matter in respect of which any such indication may be misleading."

46. S.25(2) provides:

"A contravention of a code of practice approved under this section shall not of itself give rise to any criminal or civil liability, but in any proceedings against any person for an offence under section 20(1) or (2) above -

(a) any contravention by that person of such a code may be relied on in relation to any matter for the purpose of establishing that that person committed the offence or of negativing any defence; and

(b) compliance by that person with such a code may be relied on in relation to any matter for the purpose of showing that the commission of the offence by that person has not been established or that that person has a defence."

The Code

47. Pursuant to the powers conferred by s.25 of the CPA the DTI approved a Code of Practice for Traders on Price Indications ("the Code") in November 1988.
48. So far as relevant to the present case, the provisions of the Code are as follows:

(A) In the Introduction to the Code:

"(2) This code of practice is approved under section 25 of the [CPA] which gives the Secretary of State power to approve codes of practice to give practical guidance to traders. It is addressed to traders and sets out what is good practice to follow in giving price indications in a wide range of different circumstances, so as to avoid giving misleading price indications. But the Act does not require you to do as this code tells you. You may still give price indications which do not accord with this code, provided they are not misleading. "Misleading" is defined in section 21 of the Act.

The definition covers indications about any conditions attached to a price, about what you expect to happen to a price in future and what you say in price comparisons, as well as indications about the actual price the consumer will have to pay. It also applies in the same way to any indications you give about the way in which a price will be calculated.

Price Comparisons

(3) If you want to make price comparisons, you should do so only if you can show that they are accurate and valid. Indications which give only the price of the product are unlikely to be misleading if they are accurate and cover the total charge you will make. Comparisons with prices which you can show have been or are being charged for the same or similar goods, services, accommodation or facilities and have applied for a reasonable period are also unlikely to be misleading. Guidance on these matters is contained in this code."

"Court Proceedings

(6) If you are taken to court for giving a misleading price indication, the court can take into account whether or not you have followed the code. If you have done as the code advises, that will not be an absolute defence but it will tend to show that you have not committed an offence. Similarly if you have done something the code advises against doing it may tend to show that the price indication was misleading. If you do something which is not covered by the code, your price indication will need to be judged only against the terms of the general offence. The Act provides for a defence of due diligence, that is, that you have taken all reasonable steps to avoid committing the offence of giving a misleading price indication, but failure to follow the code of practice may make it difficult to show this."

"Other Legislation

(8) This code deals only with the requirements of Part III of the Consumer Protection Act 1987. In some sectors there will be other relevant legislation. For example, price indications about credit terms must comply with the Consumer Credit Act 1974 and the regulations made under it, as well as with the Consumer Protection Act 1987."

In Part 1 of the Code dealing with Price Comparisons:

"1.1 Price Comparisons generally

.…

1.1.3 It should be clear what sort of price the higher price is. For example, comparisons with something described by words like "regular price", "usual price" or "normal price" should say whose regular, usual or normal price it is (eg "our normal price"). Descriptions like "reduced from" and crossed out higher prices should be used only if they refer to your own previous price. Words should not be used in price indications other than with their normal everyday meanings."

"1.2 Comparisons with the trader's own previous price

General

1.2.1 In any comparison between your present selling price and another price at which you have in the past offered the product, you should state the previous price as well as the new lower price.

1.2.2 In any comparison with your own previous price:

(a) the previous price should be the last price at which the product was available to consumers in the previous 6 months.

(b) the product should have been available to consumers at that price for at least 28 consecutive days in the previous 6 months; and

(c) the previous price should have applied (as above) for that period at the same shop where the reduced price is now being offered.

The 28 days at (b) above may include bank holidays, Sundays or other days of religious observance when the shop was closed; and up to 4 days when, for reasons beyond your control, the product was not available for supply. The product must not have been offered at a different price between that 28 day period and the day when the reduced price is first offered.

1.2.3 If the previous price in a comparison does not meet one or more of the conditions set out in paragraph 1.2.2 above:

(i) the comparison should be fair and meaningful; and

(ii) give a clear and positive explanation of the period for which and the circumstances in which that higher price applied.

For example "these goods were on sale here at the higher price from 1 February to 26 February" or "these goods were on sale at the higher price in 10 of our 95 stores only". Display the explanation clearly, and as prominently as the price indication. You should not use general disclaimers saying for example that the higher prices used in comparisons have not necessarily applied for 28 consecutive days. "

49. The Secretary of State has power to modify or withdraw his approval of the Code. On 28 March 2003 the DTI published a consultation document regarding revisions of the Code, together with a draft of the DTI's proposed revisions. The deadline for responses was 27 June 2003. A revised version of the Code has not yet been published.

Trading Standards Departments

50. In addition to the OFT, local TSDs have powers to enforce the Regulations and to apply for an enforcement order under Part 8 of EA 2002. There are over 200 TSDs in England and Wales.
51. TSDs' enforcement powers in respect of the Regulations first arose on 1 June 2001, when the SNORs came into force.
52. As regards Part 8, s.213(1) of EA 2002 provides that every TSD is a general enforcer for the purpose of that Part.
53. In addition, TSDs have always had the duty and power to enforce the provisions of Part III of the CPA: CPA s.27(1).
54. Northumberland TSD has had "home authority" status for TOC since May 2000. The "home authority" is the authority where the relevant decision making base of the retailer is located. The principle of the "home authority" is designed to promote co-operation between enforcement authorities and industry and trade. One of the facets of the concept of the "home authority" is that every company offering goods and services should be able to depend on the "home authority" for initial guidance or advice.

Foreign regulatory codes and jurisprudence

55. The OFT has put in evidence legislation and guidelines in the US, Canada and New Zealand regulating misleading advertisements and representations in respect of the price of goods, particularly in the area of discounts from the retailer's own former prices.
56. The OFT relies upon that material as providing useful guidance on, and supporting the OFT's case on, implied representations in an advertisement making a "former price" comparison.

US

57. The OFT referred to sections 5, 12 and 15 of the US Federal Trade Commissions Act (15 U.S.C. §§ 45, 52 and 55). So far as relevant, they provide as follows:

"§.45. Unfair methods of competition unlawful; prevention by Commission.

…..

(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful…

(2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations… from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."

"§.52 Dissemination of false advertisements

(a) Unlawfulness

It shall be unlawful for any person, partnership, or corporation to disseminate, or cause to be disseminated, any false advertisement –

….

(b) Unfair or deceptive act or practice

The dissemination or the causing to be disseminated of any false advertisement within the provisions of subsection (a) of this section shall be an unfair or deceptive act or practice in or affecting commerce within the meaning of section 45 of this title."

"s.55 Additional definitions

(a) False advertisement

(1) the term 'false advertisement' means an advertisement, other than labelling, which is misleading in a material respect; and in determining whether any advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations … "

58. The Federal Trade Commission has issued specific guidance in relation to former price comparisons. Para 233.1 of the Commission's Guides Against Deceptive Pricing states, so far as relevant:

"(a) One of the most commonly used forms of bargain advertising is to offer a reduction from the advertiser's own former price for an article. If the former price is the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison. Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious – for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction – the "bargain" being advertised is a false one; the purchaser is not receiving the unusual value he expects. In such a case, the "reduced" price is, in reality, probably just the seller's regular price.

(b) A former price is not necessarily fictitious merely because no sales at the advertised price were made. The advertiser should be especially careful, however, in such a case that the price is one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of his business, honestly and in good faith – and, of course, not for the purpose of establishing a fictitious higher price on which a deceptive comparison might be based.…

(c) The following is an example of a price comparison based on a fictitious former price. John Doe is a retailer of Brand X fountain pens, which cost him $5 each. His usual markup is 50 percent over cost; that is, his regular retail price is $7.50. In order subsequently to offer an unusual "bargain", Doe begins offering Brand X at $10, Now Only $7.50!" This is obviously a false claim. The advertised "bargain" is not genuine."

59. That benchmark was applied in Colorado –v- May Department Stores Company NY 1990 WL 322653 (Colorado District Court); 849 P.2d 802 (Colorado Court of Appeals); 863 P.2d 967 (Supreme Court of Colorado). That case concerned the defendant's use of price comparison advertising, in which it directly or indirectly compared an advertised sale price with the higher reference price, typically the defendant's "regular" or "original" offering price for that item. In the District Court, Judge Naves said:

"May D & F's buyers, who set prices, knew that no or very few items in its Home Store would sell at the inflated "original" price. However, the buyers did not care because that original price was maintained for only ten days at the beginning of each six-month selling season. May D & F intended and expected to sell almost all of its merchandise at the initial mark-up … level or below. The advertised bargain of the reduction from the "original" to the "sale" price was a false claim and was not genuine. A true, genuine claim would be to use the initial mark-up price as the reference price because that was, in fact, the regular price of items in the Home Store. May D & F's comparative price advertising policy in effect prior to August, 1989, clearly violated the FTC Guides.

…

May D & F's policy and practice of comparison price advertising, in effect in its Home Store pursuant to its 1989 Policy violated the FTC Guides because its "regular" price is not a bona fide price but, rather, a subjective, artificial, and inflated price established for the purpose of advertising subsequent large reductions."

60. In the Court of Appeal Judge Dubofsky, with whom the other two judges agreed, said:

"[6] In order to avoid violating the CCPA, May D & F must set the initial … reference price as a bona fide price at which it intends to sell a significant number of products… It cannot be set so high that it is a fictitious price which results in deceptive or misleading advertisements."

Canada

61. Section 74.01 (3) of the Canadian Competition Act 1985 provides as follows:

"A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting directly or indirectly, any business interest, by any means whatever, makes a representation to the public as to price that is clearly specified to be the price at which a product or like products have been are or will be ordinarily supplied by the person making the representation where that person, having regard to the nature of the product and the relevant geographic market,

(a) has not sold a substantial volume of the product at that price or a higher price within a reasonable period of time before or after the making of the representation as the case may be; and

(b) has not offered the product at that price or a higher price in good faith for a substantial period of time recently before or immediately after the making of the presentation, as the case may be."

62. The Government of Canada has issued an Information Bulletin on that section, in which guidance is given on the meaning of the expression "in good faith". The bulletin says, in that context :

"In good faith

In assessing if a product was offered for sale in good faith, some of the factors that the Bureau would likely consider include whether:

(a) the product was openly available in appropriate volumes;

(b) the reference price was based on sound pricing principles and/or was reasonable in light of competition in the relevant market during the time period in question;

(c) the reference price was a price that the supplier fully expected the market to validate, whether or not the market did validate this price; and/or

(d) the reference price was a price at which genuine sales had occurred or it was a price comparable to that offered by competitors."

63. That test was recently applied by the Canadian Competition Tribunal in Commissioner of Competition –v- Sears Canada Inc. 2005 Comp. Trib.2. That case concerned a discounting strategy where discounts were claimed by reference to inflated "regular prices", which were not prices at which any substantial sales were made, or intended to be made. In that case Dawson J said the following about "good faith" in the context of the Competition Act:

"[239] I conclude therefore that good faith is to be determined on a subjective basis. In this case, the question to be asked is whether Sears truly believed that its regular prices were genuine and bona fide prices, set with the expectation that the market would validate those regular prices. As noted by the Court in Dorman, supra the reasonableness of a belief is a factor to be considered in determining whether a belief is honestly held. I therefore also accept that other external, objective factors such as whether the reference price was comparable to prices offered by other competition and whether sales occurred at the reference price, may provide evidence that is relevant to assessing whether Sears truly believed its regular prices were genuine and bona fide."

New Zealand

64. The New Zealand Fair Trading Act 1986 provides in section 13:

"No persons shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,-

….

(g) Make a false or misleading representation with respect to the price of any goods or services;"

65. The New Zealand Commerce Commission's guidelines on that section of the Fair Trading Act comment as follows:

"Markdowns – Usually $X now $Y

It is relatively common for businesses to compare the prices of their goods or services with the usual price of those items in order to indicate to consumers that they can obtain a bargain by purchasing the item now. Where the 'usually' price used is genuine, the bargain being advertised can be a true bargain. There are two primary ways in which the advertising of former prices can be misleading:

1. The 'usually' price is an artificially inflated price established for the purposes of enabling the subsequent offer of an apparent large reduction. A comparison price should be one which is based on the regular mark-up, not an inflated one, and be a realistic market price at which sales are regularly made. If significant sales have not been made at the 'usually' price, then this is likely to indicate that the comparison price was not genuine. Any price comparison, when closely examined, will need to be supported by the actual facts of the particular case.

2. The 'usually' price is out of date. The comparison prices should be ones at which the items have been sold sufficiently recently and have applied for a reasonable period to meet the description 'usually'. What is a reasonable period may depend on factors such as the type of product or market involved and the usual frequency of price changes.

….."

Witnesses

66. Witness Statements were made, on behalf of the OFT, by Steven Wood, a Branch Director in the Consumer Regulation Enforcement Division in the OFT. He also gave oral evidence at the trial.
67. Witness statements were made, on behalf of TOC and Mr Charlton, by the following persons: Mr Charlton himself; Diane Heslop, a director of Rajan Imports Limited, which has supplied a wide range of men's fashionwear to TOC for some 11 years; Jeffrey Hope, a director of A & D Hope (SCS) Limited, which has supplied a wide variety of clothing to TOC for some 10 years; Peter Watson, who is employed by TOC as Senior Buyer, and has worked for TOC for over 5 years; and Marc Wimpenny, who was initially employed by TOC as Retail Operations Director in January 2002, and has been its Chief Executive Officer since September 2004.

The OFT's case

68. The OFT's case is that an ordinary and reasonable consumer, reading TOC's advertisements that the prices of its products were discounted by 70%, would inevitably have drawn the inference that the discounts were "genuine".
69. That inference, the OFT says, was neither removed nor diminished by "disclaimer" notices stating that all discounted goods had been for sale at the higher price at six or more of TOC's stores for a minimum of 28 days in the preceding 6 months.
70. The OFT submits that, in determining whether a discount is "genuine", it is relevant to take into account a number of factors, which overlap. Those factors include, in particular, whether the higher prices were "genuine", "good faith" prices, at which the goods had been "actively offered for sale" for a substantial period of time, or whether, by contrast, the higher prices were "artificial" or "inflated prices", and were set "with the overriding purpose of claiming the subsequent discount": OFT's written closing submissions para. 14.
71. In listing those factors, the OFT has drawn guidance from the law and regulatory material in the USA, Canada and New Zealand mentioned earlier in this judgment.
72. The OFT submits that, irrespective of that foreign law, those factors encapsulate what, as a matter of common sense, would and should be taken into account in determining whether the advertised discount was genuine.
73. The OFT contends that, taking those factors into account in the present case, it is clear beyond doubt that the discount in TOC's stores was not genuine. The higher prices, it submits, were never prices fixed in good faith, and at which the goods were actively marketed for sale. The vast majority of the goods were never offered for sale at all at the higher prices. TOC never expected to offer or sell any significant proportion of its goods at those higher prices. The OFT contends that the higher prices were artificial and inflated, for the overriding purpose ("solely for the purpose" according to paras 3 and 39 of the OFT's opening skeleton argument) of fixing the subsequent discount - the discounted price being, in fact, TOC's standard price. In short, the OFT says the 70% discount was not genuine because it was from a price which had been set for the overriding purpose of claiming the discount, with no intention or expectation of selling any significant proportion of the goods at that price.
74. In support of those contentions, Ms Carss-Frisk QC, leading Ms Kelyn Bacon, for the OFT, relied upon the facts and matters in paras 14 to 19 above. She also relied upon the facts, which were agreed during the course of the trial, that the average proportion of higher price, "Red Star", stock in the 19 stores which sold "Red Star" items was 0.14%, and that during the period 1 September 2002 to 28 June 2003 93% of the "Red Star" sales were on only 39 out of 1515 styles, that is to say, 2.5% of the style range. She also relied upon evidence of Mr. Watson (both in his witness statement and his oral testimony) and of Mr. Charlton in cross-examination, which, the OFT submits, shows that the higher prices were fixed by a process of grossing up so as to achieve a 65% gross profit margin on its standard "70% off" prices.
75. Accordingly, the OFT submits, TOC's notices were misleading advertisements within Reg. 2(2) of the Regulations: they made a false implied representation that the 70% discount was a genuine discount, which (1) deceived or was likely to deceive customers, or some of them, and (2) was likely to affect the economic conduct of such customers.

TOC's case

76. TOC's primary case is that its "70% off" strategy always complied with the Code, and accordingly there can have been no infringement of the Regulations. Mr. Croxford QC, leading Mr Thomas de la Mare, for TOC, contended in his closing oral submissions that, on the proper interpretation of the Regulations, even though the Code is only guidance there can be no infringement of the Regulations if there has been compliance with the Code: that is the allegation in paras 21.4 and 21.5 of the Defence, but cf. para. 53(3) of TOC's written opening submissions, in which it was stated that TOC did not contend that compliance with the Code is an absolute defence.
77. In support of that interpretation of the Regulations, Mr. Croxford took me through the legislative history of the regulation of misleading discount price comparisons.
78. Starting with the Final Report of the Committee on Consumer Protection (1962) Cmnd. 1781 ("the Molony Report"), he traced the historical steps through the Trade Descriptions Act 1968, the publication in 1975 by the Director General of a consultative document on "Bargain Offer Claims", the Director General's 1976 Annual Report, the Price Marking (Bargain Offers) Order 1979 SI 1979/364, the Directive, Part III of the CPA, the Regulations, the review of the Code currently being undertaken by the Secretary of State, and the publication in that context of a draft revised Code.
79. Mr. Croxford submitted that the following relevant themes emerge from that history.
80. First, the establishment of a higher price, which is then used to show a discount, is a long standing retail marketing strategy, which has a history of nearly 40 years of legislative control.
81. Second, the Code, issued after consultation with the Director General as statutory consultee under s.25(1) of the CPA, is the only advice which has existed since 1988, and which currently exists, giving official guidance to retailers in purely civil matters as well as criminal proceedings under Part III of the CPA as to how such a strategy should be operated so as to give effect to good practice and to avoid giving misleading price indications. Paras. 1.2.1,1.2.2 and 1.2.3 of the Code, TOC submits, cover precisely TOC's "70% off" strategy.
82. Third, the Regulations were plainly made against the background of those matters and in the knowledge of them. Part III of the CPA and the Code were brought into force following the Directive, and before the Regulations. Mr. Croxford pointed out that Article 3 of the Directive, which specifies certain matters to be taken into account in determining whether advertising is misleading, has not been transposed into the Regulations. According to a statement by Mr John Butcher, Parliamentary Under Secretary of State for Industry and Consumer Affairs, in the House of Commons on 10 May 1988 (Hansard HC Col. 273), to which no objection was made by Ms. Carss-Frisk, that was because it was considered unnecessary to do so as it might "serve to narrow the [existing - per Mr Croxford] interpretation of misleading advertising in the United Kingdom to a degree not intended by the directive".
83. Accordingly, TOC says, s.20 of the CPA and the Regulations, both of which use the word "misleading", are addressing the same issue and are part of a suite of provisions designed to provide a co-ordinated, complementary and comprehensive approach to the control of advertising, and so should be interpreted in a consistent manner.
84. Fourth, neither the OFT, nor the Director General before it, have ever been entirely satisfied that the legislation or the Code have dealt as rigorously as they would have wished with the long-standing discount strategy to which I have referred. Indeed, Mr. Croxford submitted that the correspondence from the OFT to the Department of Trade and Industry ("the DTI") in relation to the current review of the Code and the published draft revised Code show, firstly, that the OFT has taken the view, outside the context of these proceedings, that a strategy such as TOC's "70% off" strategy complies with the terms of the Code and the revised draft Code, and, secondly, that the Code and the draft revised Code are, in that respect, unsatisfactory. Bluntly, it is TOC's case that these proceedings are a cynical attempt by the OFT to achieve what it, and its predecessor the Director General, have not been able to achieve through legislation or Government regulation.
85. It is in the light of all those matters that TOC submits the Regulations should be given a purposive interpretation such that the Regulations cannot have been infringed if TOC's "70% off" strategy complied with the Code.
86. TOC further submits that such an interpretation is consistent with, and would give effect to, the Human Rights Act 1998 ("the HRA") s.3(1). That statutory provision requires the Court to read and give effect to primary and secondary legislation, so far as possible, in a way compatible with rights guaranteed by the European Convention on Human Rights ("the Convention"). As mentioned further below, TOC claims that it would be a breach of Article 10 of the Convention for the Court, on the application of the OFT, to grant an injunction prohibiting a marketing strategy which complies with the Code.
87. TOC submits that its "70% off" strategy complied with the Code. TOC's solicitors stated in a letter to the OFT dated 28 May 2002 that: "The "70% Off" marketing strategy has been structured around paragraph 1.2.3 of the Code". Further, TOC says that it has complied with the requests and requirements of TOC's "home" TSD, Northumberland, as to signage in the stores.
88. The "70% off" strategy did not fall, strictly, within para. 1.2.2 of the Code, since the higher, "Red Star", prices were only ever charged in 19 of TOC's stores. TOC contends, however, that it is plain from para. 1.2.3 and the examples given there that, in the light of all the notices, especially notices stating expressly that the goods had been for sale at the higher prices in six or more of TOC's branches for a minimum of 28 days in the preceding six months, the requirements of the Code were satisfied.
89. TOC's second and related line of argument is that it would be an infringement of Article 10 of the Convention ("Article 10"), and hence unlawful under HRA s. 6(1), for the OFT, or the Court on the application of the OFT, to prevent TOC from advertising in a manner compliant with the Code. HRA s.6(1) provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right. A public authority, for that purpose, includes a court: HRA s.6(3).
90. Article 10, so far as relevant is as follows:

1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers

2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.

91. It is not in dispute that commercial advertising is capable of falling within the protection of Article 10: Casado Coca v. Spain (1994) 18 EHRR 1, at para. 35.
92. It follows that any restriction on permitted forms of advertisement must be such that the interference is (a) prescribed by law, (b) in pursuit of a legitimate aim, and (c) necessary in a democratic society, so that it is proportionate in effect. In R v Shayler [2003] 1 AC 247, Lord Bingham said, at para. [23]

"It is plain from the language of article 10(2), and the European Court has repeatedly held, that any national restriction on freedom of expression can be consistent with article 10(2) only if it is prescribed by law, is directed to one or more of the objectives specified in the article and is shown by the state concerned to be necessary in a democratic society."

93. In Reynolds v. Times Newspapers [2001] 2 AC 127, of 200f-g Lord Nicholls said:

"To be justified, any curtailment of freedom of expression must be convincingly established by a compelling countervailing consideration, and the means employed must be proportionate to the end sought to be achieved."

94. It is submitted, on behalf of TOC, that the grant of an injunction under the Regulations prohibiting advertisements which comply with the Code would not be "prescribed by law" for the purpose of Article 10. TOC's argument is expressed as follows in para. 64 of its written skeleton argument:

"Foreseeability is inherent in the phrase 'prescribed by law'. A norm cannot be regarded as a 'law' unless it is formulated with sufficient precision to enable the citizen to regulate his conduct: he must be able, if need be with appropriate advice, to foresee to a degree that is reasonable in the circumstances, the consequences which any given action may entail. Legal certainty requires the existence of and compliance with adequately accessible and sufficiently precise domestic legal provisions, which satisfy the essential requirements of the concept of 'law'. The concept implies qualitative requirements, notably those of precision, accessibility and foreseeability."

95. In support of that statement, TOC relies on, among other cases, The Sunday The Times v. United Kingdom (1979) 2 EHRR 245, Winterwerp v Netherlands (1979) 2 EHRR 287, and Hashman and Harrup v The United Kingdom (2000) 30 EHRR 241.
96. In the Sunday Times case, the European Court of Human Rights ("the ECHR") said, at para 49:

"In the Court's opinion, the following are two of the requirements that flow from the expression 'prescribed by law'. First, the law must be adequately accessible: the citizen must be able to have an indication that is adequate in the circumstances of the legal rules applicable to a given case. Secondly, a norm cannot be regarded as a 'law' unless it is formulated with sufficient precision to enable the citizen to regulate his conduct: he must be able - if need be with appropriate advice – to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail."

97. In Winterwerp the ECHR said, at para 39, that "in a democratic society subscribing to the rule of law, no determination that is arbitrary can ever be regarded as "lawful"".
98. In Hashman the ECHR said, at para [31]:

"The Court recalls that one of the requirements flowing from the expression "prescribed by law" is foreseeability. A norm cannot be regarded as a "law" unless it is formulated with sufficient precision to enable the citizen to regulate his conduct. At the same time, whilst certainty in the law is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. The level of precision required of domestic legislation – which cannot in any case provide for every eventuality – depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed."

99. TOC's case, as explained by Mr. Croxford and ably and succinctly described by Mr. de la Mare, is that, if, on the proper interpretation of the Regulations, it is legally possible for an advertisement to contravene the Regulations even though the advertisement complies in all respects with the Code, then the State has failed to make the applicable law clear or precise, and so the grant of an injunction to restrain such an advertisement cannot be justified as being "prescribed by law" for the purposes of Article 10.
100. Mr Croxford analysed the position in the following way. The State has published the Code specifically for the purpose of providing a guide as to what is or is not misleading in a retail price context. TOC's "70% off" strategy was designed to comply, and did comply, with the Code. There is nothing in any other official guidance, explanatory note, policy statement or other generally accessible document indicating that the strategy is impermissible or that special considerations apply to the implied representations which the OFT maintains were made by TOC. TOC says, further, that the documentation shows there was a universal view among TSDs that TOC complied with the Code and was therefore acting lawfully. If, contrary to all those indications, TOC's strategy was in breach of the law, then the law was not, and is not, sufficiently precise or accessible to justify the proposed interference with TOC's rights of commercial free speech.
101. TOC claims that, in any event, its advertisements promoting and explaining the "70% off" strategy were clear and accurate, and leave no scope for the implied representations asserted by the OFT.
102. It is not in dispute that the actual wording of TOC's notices was accurate. The notices contained no objectionable express misrepresentation.
103. TOC contends that, viewed in their context and having regard to all the notices on display in any of TOC's stores promoting the "70% off" strategy, a reasonable consumer would have taken them literally. They provide, TOC says, all the information the ordinary, reasonable consumer might require as to where and when previous higher prices were charged for the goods. Such a consumer would not have been interested in the subjective sales and marketing intentions of TOC or have read into the notices a complex framework of implied representations, involving, at the first stage, an implied representation as to the discount being "genuine", and, at the second stage, by way of elaboration of the concept of genuineness, matters such as "bona fide" higher prices, being "actively pursued", for a "substantial period of time".
104. TOC submits that, in reality, the OFT is asserting that the notices were to be taken as impliedly representing that the higher prices were the "regular", "normal" or "usual" selling price, even though that was not expressly stated and there was no cause for the ordinary, reasonable consumer to draw that inference.
105. In support of its claim that TOC's notices were not misleading, and did not deceive, TOC relies on the fact that, notwithstanding the existence of the "70% off" strategy over many years, giving rise to millions of transactions each year and the sale of vast numbers of goods, there is no record of any member of the public ever having made a complaint to TOC about being misled, and only 9 complaints by members of the public to TSDs.
106. Further, and finally, TOC claims that, even if its notices promoting the "70%
     off" strategy did make implied representations as to the discount being a genuine discount, and the higher prices being bona fide prices at which the goods were actively marketed for sale, such representations were true.
107. Mr. Croxford submitted that evidence of TOC's witnesses, especially Mr. Watson, showed that the higher prices were fixed at a level comparable with or less than the price at which other retailers were selling similar items. Further, in the stores in which "Red Star" items were for sale, the "Red Star" stock was displayed in broadly similar numbers to the discounted stock.
108. He further submitted that the evidence showed that "Red Star" items sold at a good rate, and, indeed, at a much better rate than discounted goods. His analysis was as follows.
109. Taking the agreed figures for 31 May 2003, by way of example, "Red Star" items accounted for between 0.36% and 0.04% of stock at the "Red Star" stores. The agreed average figure for "Red Star" stock displayed in the 19 "Red Star" stores was 0.14% (based upon total "Red Star" stock in the 19 stores as a percentage of the total stock at those 19 stores). "Red Star" products were stocked in only 19 out of TOC's 159 stores, that to say 12% of the stores. Taking 12% as an indicative average, those "Red Star" stores would have accounted for 12% of TOC's total discounted sales (of 3,343,483), that is 401,220 discounted sales. So "Red Star" sales accounted for 5,034 of 406,254 total sales (total sales being 401,220 discounted sales plus 5,034 "Red Star" sales), that is to say, 1.2% of sales. Accordingly, 0.14% of "Red Star" stock accounted for 1.2% of sales, giving a sales to stock ratio of approximately 8.5 (i.e. 1.2 divided by 0.14), compared with that for discounted items of approximately 1 (i.e. 99.8 divided by 98.8). The "Red Star" items which were on sale were, therefore, selling on average approximately eight and a half times as well as discounted stock.

Analysis

110. I have no hesitation in rejecting TOC's contention that, on the proper interpretation of the Regulations, it is legally impossible for there to be an infringement of the Regulations if there has been compliance with the Code.
111. Contrary to the impression created by the submissions on behalf of TOC and Mr Charlton, this issue does not turn on whether there is any material difference between the concept of "misleading" in the Regulations and in Part III of the CPA. The OFT does not contend that there is any such difference. Rather, the issue turns on the legal status and significance of the Code itself.
112. The Code was published pursuant to s.25(1) of the CPA. As stated in that sub-section, it was intended to provide practical guidance and promote desirable practices in the context of price indications.
113. The OFT accepts that compliance with the Code may assist in determining whether a price indication is misleading.
114. It is clear, however, from s.25 (2) that compliance with, or breach of, the Code is given specific statutory relevance only in proceedings for an offence under s.20 of the CPA.
115. Section 25(2) also makes it perfectly clear that, even for the purposes of proceedings under s. 20, neither contravention of, nor compliance with, the Code is automatically determinative of the proceedings.
116. All those limitations on the Code are repeated in, and reinforced by, paras. 2, 6 and 8 of the Code itself.
117. There is nothing in the Regulations themselves, nor in any other statute or statutory instrument, which expressly qualifies the legal meaning or effect of the Regulations by reference to the Code.
118. In the circumstances, I cannot see that the legislative history described by Mr. Croxford, including the fact that the Regulations were made after the Code was published, which was itself published after the Directive, can in any way restrict the meaning and effect of the Regulations, and, in particular, Reg. 2(2).
119. In fact, if it is taken into account at all, the legislative history tends, in my judgment, to support and reinforce the conclusion that the Regulations were never intended to be interpreted in the manner for which TOC contends.
120. An important theme of the legislative history leading up to the enactment of Part III of the CPA was the difficulty of imposing a suitable regulatory framework covering retail sales discounted from a higher price. The ingenuity of retailers made it relatively easy for them to adapt their practices and to create new marketing and sales strategies which circumvented the legislation.
121. In the 1991 (3^rd) edition of Lowe and Woodroffe on Consumer Law and Practice the authors observed, with regard to the Price Marking (Bargain Offers) Order 1979:

"The Order… well illustrates the difficult task of attempting by detailed regulations to block up numerous distinct business malpractices. Such a specific approach was a challenge to entrepreneurs and their legal advisers to invent new practices and slogans which technically did not fall foul of the Order –hardly a valuable use of commercial time and ingenuity."

122. The provisions of s.25 of the CPA and the terms of the Code itself represent, fairly clearly in my judgment, an attempt by the legislature and the Government to provide a regulatory framework which gave retailers some certainty, but also left the regulatory authorities with sufficient flexibility to curtail and prevent misleading price indications irrespective of strict compliance with the letter of the practical guidance.
123. The prudence, and indeed necessity, for such a flexible approach is demonstrated by TOC's interpretation of the Code. Mr. Croxford frankly accepted in his closing oral submissions that it is TOC's contention that, provided there is adherence by the retailer with the actual wording of para. 1.2.2 of the Code, a discount strategy like the "70% off" strategy would be authorised and permissible both under the CPA and the Regulations even though only 1 item of each style of the goods, irrespective of size and colour, was ever offered for sale at the higher price (provided it was on offer for 28 days), and no matter how exorbitant and artificial that higher price. Such a proposition is, on its face, so remarkable and so manifestly contrary to proper regulation, that, in the absence of the plainest possible words compelling such a conclusion, it must instantly be rejected as the intended meaning and effect of Part III of the CPA, the Code or the Regulations.
124. The OFT sought to reinforce its submissions, on this part of the case, by referring to the principle of "autonomous interpretation" of European Community law so as to ensure its uniform application throughout the different Member States. The principle was expressed as follows in R (on the application of Wells) v Secretary of State for Transport, Local Government and the Regions (7.1.2004) Case C-201/02, at para. 37

"The Court has consistently held that, in light of both the principle that Community law should be applied uniformly and the principle of equality, the terms of a provision of Community law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope is normally to be given throughout the Community an autonomous and uniform interpretation which must take into account the context of the provision and the purpose of the legislation in question."

See also R (on the application of Yiadom) v Secretary of State for the Home Department Case - C 357/98 [2000] ECR 9265, para 26.

125. The OFT submitted that the concept of "misleading advertisement" in the Regulations is, therefore, to be given an autonomous meaning by reference to the context and the purpose of the Directive, which cannot be limited by a provision of domestic law.
126. In view of my decision on the limitations of the relevance and application of the Code in the light of the express terms of s. 25 of the CPA and the provisions of the Code itself, the issue of autonomous interpretation does not arise.
127. I do not accept Mr. Croxford's submission that the OFT's conduct, outside these proceedings, shows that the OFT actually considers that marketing and sales strategies like TOC's "70% off" strategy are authorised by the Code and would be authorised by the draft revised Code. While it is clear that the OFT would like the Code to deal in a more explicit and rigorous manner with what the OFT sees as the deficiencies in such strategies, Mr Croxford's submission is not consistent with the views expressed by the OFT in correspondence between the OFT and the DTI in connection with the draft revised Code. In a letter concerning the review of the Code from Mr. Michael Lambourne of the OFT to the DTI dated 29 October 2004, for example, Mr. Lambourne said:

"We understand that it was the policy of section 20 of the 1987 Act to prevent traders from artificially raising prices with a view to then claiming a false price reduction. We believe that the Code is intended to reflect and amplify the details of this policy.

On this footing, we are not suggesting that the Code should include any new policy initiatives that did not from part of the public consultation exercise. Our proposals for alternative forms of words for paragraph 1.2.3. of the Code are intended to make the policy that already underlies the 1987 Act and the Code more transparent, rather than representing any substantive change in policy. In our view, the effect of the Code, whether in its original or present draft form, has always been that inflating the selling price of goods, for the overriding purpose of pretending that the price for which the trader intends to actively market them is a reduction, is unlawful. However, we consider that there is considerable merit in explaining this principle to traders more clearly, in the interests of consumer protection and the promotion of fair competition between businesses using legitimate advertising."

128. Nor, in my judgment, does HRA s.3 require the Regulations to be interpreted in the manner for which TOC contends.
129. TOC does not now assert that the Regulations themselves are incompatible with Convention rights. Notwithstanding that Reg. 2(2) is expressed in general language ("deceives or is likely to deceive"), it is accepted by TOC that Reg. 2(2) is sufficiently accessible and precise to qualify as a restriction (on the right of freedom of expression) "prescribed by law" for the purposes of Article 10. It is to be noted that the part of the judgment of the ECHR in The Sunday Times –v- the United Kingdom relied upon by TOC (quoted in para 96 above) continues as follows:

"Those consequences need not be foreseeable with absolute certainty: experience shows this to be unattainable. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice."

130. In the light of the express limitations (in the CPA and the Code itself) on the relevance or application of the Code outside (or, indeed, even within) proceedings for an offence under s. 20 of the CPA, I do not accept that there is anything in HRA or the Convention which requires the Court to refuse relief in these proceedings to the OFT in the light of the provisions of the Code.
131. Nor is that conclusion, as to HRA and the Convention, affected by the co-operation of TOC with its "home" TSD, Northumberland, particularly in relation to the notices in TOC's stores. Neither Mr. Croxford, nor Mr. de la Mare, put forward any proposition of law that, merely because TOC has been permitted to trade, and doubtless to earn substantial profits, for many years unlawfully, HRA or the Convention precludes the OFT now enforcing the Regulations.
132. In any event, the evidence does not show that Northumberland TSD accepted, let alone agreed, that TOC's "70% off" strategy was lawful, even if it complied with the letter of the Code. In 2001 Northumberland TSD, responding to a complaint by one of TOC's competitors, advised that TOC was "complying with the letter although not the spirit of the Code of Practice."
133. Further, in February 2002 Kingston TSD prosecuted TOC in relation to "last day" posters, which had been in place for over a week. TOC was convicted of a charge under the CPA. During the hearing, TOC's solicitor claimed that TOC's marketing strategy had been "approved" by Northumberland TSD. As a result of that statement, Northumberland TSD held a meeting on 21 March 2003 with David Glazebrook, the then Managing Director of TOC. That meeting was followed by a letter from Northumberland TSD of the same date, which stated:

"I would like to make it absolutely clear that the discussions and advice that we have given you in the past in no way constitute a general approval for your company's marketing policies.

In the past you have invited us to comment on your compliance with specific aspects of the Code of Practice for Traders on Price Indications. I do not wish to deviate from the advice that we have given to you in the past. However as you are aware the code is only a guide to the requirements of the Consumer Protection Act 1987. The code and the legislation itself are open to interpretation and only the courts can ultimately decide whether a particular course of business complies with the law or not. The advice that we have given you does not give you immunity from prosecution should another authority decide that you are in breach of the legislation.

Over and above our duty to advise you on the technical requirements of the legislation we have a general duty to guide you on what we feel would be best practice in the interest of fair-trading and consumer protection. In this context I would like to make it clear that I do not feel that your current marketing strategy is in the best interest of consumers and indeed I believe it has the potential to mislead."

134. Kingston TSD itself sent a letter to TOC on 31 July 2002, stating that:

"This department is of the view that … the general operation of the "70% off" everything' promotion run in your stores does not comply with the 'Code of Practice for Traders on Price Indications' issued under the [CPA] and that such price indications are misleading."

135. Unsurprisingly, in view of the stance taken by TOC and Mr Charlton as to the legal significance of, and compliance with, the Code, legal submissions and evidence were deployed at the trial on the issue of whether the notices in TOC's stores promoting the "70% off" strategy complied with the Code. For the reasons I have given, even if TOC complied with the Code, that would not automatically be determinative of the outcome of these proceedings. I have, however, been invited to determine the issue of compliance with the Code as a specific issue in the litigation, and, accordingly, I shall express my views on it briefly.
136. It is common ground between the parties that TOC's advertisements did not fall within para 1.2.2 of the Code, at least with regards to the overwhelming majority of TOC's stores, since only a very small proportion of those stores offered goods for sale at the higher price and so satisfied para 1.2.2(c) of the Code.
137. The question, therefore, is whether para 1.2.3 of the Code was satisfied. That turns on whether TOC complied with the requirement in para 1.2.3(i) of the Code that "the comparison should be fair and meaningful". The OFT maintains that the requirement of a "fair and meaningful" comparison in para 1.2.3 is free-standing, and is not to be cut down by reference to the provisions of para 1.2.2 or the example given at the end of para 1.2.3. The OFT's case is that the comparison was not fair and meaningful in all the circumstances.
138. Mr Croxford, on behalf of TOC and Mr Charlton, submitted that, in a case in which the requirements of para 1.2.2 of the Code were not satisfied merely because the discounted goods were not previously offered for sale at the same store where the reduced price was being offered, it is clear, both as a matter of interpretation and as a matter of common sense, that para 1.2.3(i) is to be treated as satisfied if a notice is displayed, complying with the example at the end of para 1.2.3, stating that the goods were on sale at the higher price in a specified number out of all the retailer's shops. As I have said, TOC's stores did contain a notice that the discounted goods had been for sale at the higher price "at 6 or more of our branches" for a minimum of 28 days in the preceding 6 months. Mr Croxford said that the "fair and meaningful" requirement is merely "looking at the language and the clarity of the words used to express the comparison" (transcript 5.5.2005 pp.180-189).
139. Mr Croxford's submission was attractively presented, and has a logical attraction to it. The contention between the parties, however, is whether the "strict letter" of the Code has been satisfied. It is clear, in my judgment, that the example at the end of para 1.2.3 of the Code relates specifically to the requirement in para 1.2.3(ii) that the notice must give "a clear and positive explanation of the period for which and the circumstances in which [the] higher price applied". The requirement in para 1.2.3(i) is a different and independent requirement. I appreciate that such an interpretation appears to impose more extensive and stringent requirements under para 1.2.3. than, on its strict wording, apply in the case of para 1.2.2. While that may be a surprising, or even confusing situation, it seems to me to be merely the consequence of seeking to subject a document of practical guidance, written in simple language for the benefit of a wide range of lay readers, to a detailed legal analysis more appropriate for a legal document or legislation.
140. For the reasons which I give later in this judgment, I agree with the OFT that the previous price comparison in TOC's notices promoting the "70% off" strategy was not "fair and meaningful", within para. 1.2.3(i) of the Code.
141. Accordingly, I reject the case of TOC and Mr Charlton that TOC conducted its "70% off" strategy in accordance with the requirements of the Code.
142. I emphasise again, however, that, even if I am wrong in that conclusion and TOC's notices did comply with the Code, the Court is not precluded in law, for the reasons I have given in paras 110-122 above, from finding that TOC's notices were misleading and unlawful for the purpose of the Regulations.
143. The OFT advanced a submission that, even if TOC's notices promoting the "70% off" strategy complied with the letter of the Code, they did not comply with "the spirit" of the Code. It is not necessary, in the circumstances, to adjudicate on that submission. I would observe, however, that, in view of the express limitations on the statutory relevance of the Code to which I have referred earlier in this judgment, it seems to me that reference to the "spirit" of the Code is an unnecessary complication when seeking to interpret and apply the Regulations in any particular case.
144. I turn to the issue which lies at the heart of the proceedings, namely, whether TOC's advertisement or notices promoting the "70% off" strategy contained the implied representations alleged by the OFT.
145. It is clear that an advertisement may be misleading for the purposes of the Regulations as a result of an implied statement as much as an express one. Reg. 2(2) refers to an advertisement which deceives or is likely to deceive "in any way, including its presentation"; compare CPA s.21(1) and (2) ("what is conveyed by the indication, or what …consumers might reasonably be expected to infer from the indication") . In Director General of Fair Trading –v- Blinkhorn 7.11. 1989 (unreported), Vinelott J said:

"Mr Shannon, who appeared for Mr Blinkhorn… said that everything in the newspaper advertisements and in the leaflets is literally true, and that what is literally true cannot be said to deceive or be likely to deceive. I do not accept that submission. The question whether an advertisement is misleading within Regulation 2.2. can, I think, only be answered by asking whether a person, characteristic of the class to whom the advertisement is addressed, would or would not form a false understanding or impression. A document may be misleading, though literally everything in it is true, if the way in which what it says is presented carries with it implications and inferences which the ordinary reader would certainly draw."

146. It is common ground that the touchstone, on this issue, is the view of the ordinary, reasonable consumer characteristic of the class to whom the advertisement is addressed. The Court must reach a conclusion on that view, irrespective of whether or not there is any actual evidence from consumers. Evidence from such consumers is, therefore, not necessary. The position, in this respect, is comparable to passing off actions, where the Court has to decide whether the matter complained of is calculated to deceive, that is to say whether the defendant, by his conduct, has represented to the public or a particular class of public that the goods are the claimant's goods. The position in those actions appears from the following passage in the judgment of Lord Parker in AG Spalding & Bros –v- AW Gamage Ltd (1915) 32 RPC 273, 286:

"It was also contended that the question whether the advertisements were calculated to deceive was not one which your Lordships would yourselves determine by considering the purport of the advertisements themselves, having regard to the surroundings circumstances, but was one which your Lordships were bound to determine upon evidence directed to the question itself. I do not take this view of the law. There may, of course, be cases of so doubtful a nature that a Judge cannot properly come to a conclusion without evidence directed to the point; but there can be no doubt that in a passing-off action the question whether the matter complained of is calculated to deceive, in other words, whether it amounts to a misrepresentation, is a matter for the Judge, who, looking at the documents and evidence before him, comes to his own conclusion, and, to use the words of Lord Macnaghten in Payton & Co Ltd. –v- Snelling Lampard & Co Ltd. (17 R.P.C. 635), "must not surrender his own independent judgment to any witness whatever"."

147. Indeed evidence from actual or potential consumers may be unhelpful: if the evidence is given by too few of them, their views will not be sufficiently representative of the entire range of such customers; if a large number, intended to cover the full range, gives evidence, the adverse affect on the cost and duration of the trial may be disproportionate to the value of their evidence.
148. The OFT seeks to support its case on implied representations by relying on a report prepared by academic staff of the Marketing Division of Nottingham University Business School titled "Research Into Misleading Price Comparisons". That report ("the Nottingham Report"), which is lengthy, was commissioned by the OFT. The OFT says that the Nottingham Report shows that, even where consumers are sceptical, advertised discounts have an affect on the consumers' perceptions of the product and on their decision whether to purchase.
149. The Nottingham Report was not adduced as expert opinion evidence. No permission has been granted for any such opinion evidence.
150. Further, the Nottingham Report was not written for the purpose of these proceedings. It involves no research on the actual operation of TOC's stores, or TOC's "70% off" strategy, or any actual customers who have bought goods in TOC's stores, or the types of goods sold in TOC's stores. It examines research in the US, but concludes in relation to the available literature:

"While the potentially detrimental effects of exaggerated former price comparisons have been identified in the USA, there is little or no evidence that examines the impact of former price comparisons for UK based customers and it may be unwise to assume that US generated results will simply generalise to a different cultural context. In addition, although there is considerable evidence relating to the impact of reference prices on consumers, the way in which former price comparisons are presented is rather less well understood."

151. In the circumstances, while the Nottingham Report may be a work of considerable skill and academic achievement and of interest and value in other contexts, it is of no value whatever in determining the outcome of these proceedings.
152. As I have previously said, TOC, for its part, relies, on this part of the case, on the evidence that no consumers have ever made any direct complaints to TOC about the "70% off" strategy. TOC also relies on the evidence that only some 9 consumers have ever made any complaints to TSDs about the strategy.
153. Those matters do not assist TOC. It is of the very nature of a misleading or deceptive advertisement that the consumer is left unaware of the true facts. Further, many consumers, even though aware of the deception, and even though aggrieved, may not have the time, ability, personality or inclination to write a formal letter of complaint or even make an oral complaint, whether to TOC itself or, if aware of or directed to it, the local TSD. Furthermore, the fact remains that some consumers have in fact taken the trouble to complain to their TSDs about the misleading nature of the "70% off" strategy, in particular stating that the purported full prices were "unrealistic" and "inflated" and complaining that TOC was deliberately trying to mislead consumers into believing that its prices were reduced. Moreover, several TSDs have themselves from time to time expressed concerns over TOC's "70% off" strategy and its lawfulness.
154. TOC also asserts that a large number of its customers are "repeat" or regular customers, who would be very familiar with TOC's strategy.
155. That assertion does not assist, since TOC itself accepts that the actual or potential shoppers exposed to the "70% off" advertisements were likely to include persons having a range of experience as shoppers dealing with UK retailers.
156. I consider that, taking into account all the notices typically to be found in one of TOC's stores when it was promoting the "70% off" strategy, those notices were making implied representations to customers about the higher price. I reject TOC's case that the express terms of the notices left no scope for any such implication in the mind of the ordinary, reasonable consumer characteristic of the class to whom the notices were addressed.
157. I agree with the OFT such a customer would have regarded the notices as implicitly stating that the higher price was a genuine price as distinct from, and by contrast with, an artificial price.
158. I agree with the OFT that it is a facet of a genuine price, in this context, that the seller honestly believes that the price is an appropriate sale price for the goods.
159. I also agree with the OFT that the notices carried the implied representation that significant quantities of the goods had actually been offered for sale at the higher price. The OFT formulated the representation as to the quantity of goods offered for sale as being a substantial or significant "proportion of the goods". There are difficulties in applying that formulation to a situation in which the goods were offered for sale at the higher price for a relatively short period, and were then sold at the discounted price over an extended period from both original and replacement stock. I agree, however, with the OFT to the extent that, in this context, a "significant" quantity for sale at the higher price involves a comparison with the total number available for sale at any moment of time at the lower price: in other words, it involves a snapshot comparison at a particular moment in time between what had previously been offered for sale at the higher price and what at that later snapshot moment was offered for sale at the discounted price.
160. I do not consider that the OFT has made out its case, the burden of proving which lies on it, that the representation as to the higher price being a genuine price carried with it, or implicitly involved, a representation that the higher price had not been set with the overriding purpose of claiming the subsequent discount.
161. Provided that the higher price was a price at which TOC at the time honestly believed that the goods could then be sold in significant numbers, and provided significant numbers of the goods had in fact been placed by TOC on the market for sale at that price, I see no reason why the ordinary, reasonable consumer paying the discounted price would believe that he or she had been misled and deceived merely because TOC had always intended to reduce the goods to the discounted price in order to achieve a higher and quicker turnover at that price.
162. It should be noted that the OFT does not contend for an implied representation that TOC had reasonable grounds for believing that the higher prices were prices at which significant quantities of the goods could be sold. On the other hand, as Dawson J pertinently observed in the Sears Canada case, to which I have referred earlier, the reasonableness of a belief is a factor to be considered in determining whether a belief is honestly held that the goods could be sold at that price in significant numbers. A price which is not, in fact, comparable to prices offered by competitors or at which no or relatively few items are sold may indicate, as Dawson J found in his case, that the retailer did not honestly believe that the goods could be sold at that price in significant numbers.
163. Finally, the OFT contends that there was an implied representation that the goods had been offered for sale at the higher price "for a reasonably substantial period of time": see OFT's opening skeleton argument at para 95 on p.32. I agree with the assumption underlying that submission that the concept of a genuine, as distinct from an artificial (higher) price, and the related implied representation that significant quantities of the goods had been offered for sale at the higher price, carry with them an implied representation about the length of time the goods were offered for sale at that price. The implication is that the goods have been offered for sale at the higher price for a period at least sufficient to be a genuine offer of sale to the section of the public likely to be interested in purchasing such goods in TOC's stores: it implies sufficient time for knowledge of the availability of the goods to be acquired by that section of the public, and sufficient time for them to view the goods, make up their minds whether to purchase them, and, if so, to complete the purchase of them. There was no evidence before me, and no submissions were made to me, about that length of time in relation to TOC's goods. I therefore do not know whether or not such a period would have had to be "substantial". TOC's notices specifically stated that the discounted goods had been offered for sale at the higher price "for a minimum of" 28 days in the preceding six months. Such notices are not inconsistent with any such implied term as to the duration of the offer for sale at the higher price, but, as I have said, I have no evidential basis for reaching any conclusion as to whether or not that would have been longer than 28 days.
164. In making those findings on the implied representations made in TOC's notices, I have not relied on the legislation and jurisprudence in the USA, Canada and New Zealand mentioned earlier in this judgment. That material is of general interest in showing how other jurisdictions have grappled with the issue of misleading price indications. The approach taken in those countries, however, rests upon the precise wording of the relevant legislation and associated published guidance. It would be dangerous, and wrong in principle, to draw upon them for the purpose of interpreting and applying the law in this country to particular facts. My task is to find, as a mixed question of fact and law, what the actual notices in TOC's stores conveyed to an ordinary reasonable consumer characteristic of the class to whom the notices were addressed: the answer to that question cannot be found in foreign legislation or foreign regulatory guidelines.
165. Mr Croxford submitted that the implied representations, for which the OFT contends and which I have found, are not consistent with the terms and the requirements of the Directive. He submitted that they introduce subjective criteria, whereas the Directive recites the need for "objective criteria" for determining whether advertising is misleading. That submission is, in my judgment, plainly misconceived. The "objective criteria" mentioned in the Directive are to be found in Reg. 2 (2) of the Regulations which, as I have said, follows very closely Article 2.2 of the Directive.
166. Summarising my decision on this part of the case, I consider that, taking into account all the notices typically to be found in one of TOC's stores when it was implementing the "70% off" strategy, those notices were representing to customers that the higher price was one at which TOC had offered for sale a significant number of the goods, for a period of not less than 28 days in the preceding 6 months, in the honest belief that they could be sold by TOC at that price.
167. Those representations were, on the evidence, false and misleading within the meaning of the Regulations.
168. The "Red Star" items were not in fact offered for sale in significant quantities. As at 31 May 2003, by way of example, only 19 out of TOC's 159 stores offered higher price "Red Star" items; none of those 19 stores offered more than 0.36% of its stock at the higher price; and the average proportion of "Red Star" stock in the 19 stores was 0.14%. Mr Charlton's oral evidence was that usually a very small quantity of "Red Star" items of a particular line were offered for sale. He said that, for example, typically between 24 and 36 shirts of a particular line would be offered for sale at the higher price; the actual numbers, sizes and colours would be entirely dependent on what the manufacturers supplied; and the "Red Star" items would not be restocked for sale at the higher price. Those matters are reflected in the fact that, over the period 1 September 2002 to 28 June 2003, only 0.15% of the total units sold by TOC were at the higher price.
169. Further, I find that the higher price was not fixed by TOC in the honest belief that its goods could be sold by TOC at that price.
170. TOC's evidence, taken as a whole, was to the effect that the higher price was determined by reference to three factors. They were (1) the price of comparable items sold by other retailers, (2) the desire to ensure that the discounted ("70% off") price would give a gross profit in the region of 65% as against the cost of acquisition and (3) the cost of acquisition.
171. On the one hand, I do not accept the OFT's case that the higher price was set by a straightforward process of grossing up from a pre-determined discount price so as to ensure that, when the higher price was discounted by 70%, it would produce a 65% gross profit margin. Although the evidence on behalf of TOC certainly indicated that TOC would seek to achieve such a profit margin, it is also clear that TOC was not always able to do so in view of the other two variables, namely the price of comparable items sold by other retailers and the cost of acquisition. On footwear, for example, TOC's gross profit margin was 50% or less.
172. On the other hand, I am satisfied that TOC's desire to achieve, whenever possible, a gross profit margin of 65% on its standard "70% off" prices often resulted in the higher prices being fixed at a level at which TOC could not reasonably have expected to sell, and, notwithstanding the evidence of TOC's witnesses to the contrary, did not honestly believe that it could sell, many of its goods. That conclusion is born out by the following matters.
173. A spreadsheet produced by TOC, setting out its total sales over the 10 month period from 1 September 2002 to 28 June 2003, shows that, of the 1,515 styles sold by TOC over that period, the vast majority did not sell at all at the higher price, but sold in hundreds or thousands of units at the discounted price.
174. The spreadsheet shows that, as I have previously said, over the 10 month period 0.15% of units sold were at the "Red Star" prices. Those "Red Star" sales were overwhelmingly on a tiny number of styles. During that 10 month period, only 39 styles, out of the total of 1,515 styles, achieved sales of 10 or more units at "Red Star" prices; that is to say 93% of the "Red Star" sales were made on just 2.57% of the available styles. Mr Charlton's assertions that the "Red Star" items sold very well, and "generally sold at the higher prices", are plainly incorrect in the light of those figures.
175. As I have mentioned earlier, TOC maintains that the "Red Star" items were selling on average approximately 8.5 times as well as the discount stock. I do not accept that such a conclusion can safely be drawn from the available data. There is no evidence, for example, of the total amount of "Red Star" items offered for sale, or indeed of the total quantity of discount products available for sale. Accordingly, it is not possible to state the rates at which either the "Red Star" items or the discount products were selling in relation to the total quantity of each offered for sale. Further, and critically, TOC's contention on this point can only relate to the tiny percentage of styles on which any substantial sales of "Red Star" items were made, that is to say 39 styles out of the total of 1,515 styles. In relation to the other 97% of styles, the rate of sale at the "Red star" price was nil or negligible.
176. Further, the evidence, taken as a whole, did not support TOC's contention, or the evidence of its witnesses, in particular Mr Watson and Mr Charlton, that TOC's higher prices were fixed at or below those of comparable goods sold by other retailers. Mr Watson, for example, stated in para 21 of his witness statement that he would set TOC's higher prices at between half and the full selling price of other retailers. It is relevant to note, in this connection, that the evidence overwhelmingly indicates that TOC's "own brand" products would be expected to sell at less, in some cases significantly less, than similar products sold under the label of a well known style brand, such as "YSL" or "Ted Baker".
177. In fact, of the items on a comparative schedule exhibited to Mr Watson's statement, TOC's "Red Star" price was higher than the other retailer's price in 8 out of 32 cases; TOC's "Red Star" price was effectively the same as the other retailer's price in a further 9 cases; and in only 15 out of the 32 cases was TOC's "Red Star" price less than the other retailer's. Moreover, Mr Watson agreed in cross-examination that his schedule was based upon a very small sample of styles, namely 32 out of 1,515.
178. A comparative schedule was also exhibited to Mr Hope's witness statement. In relation to each of the 7 items on that schedule, TOC's "Red Star" price was higher than that charged by the other retailer. Evidence was given of the prices charged by Next in relation to the same 7 items: Mr Watson accepted that in relation to 4 out of the 7 items, TOC's "Red Star" prices were higher than the prices charged by Next.
179. Ultimately, Mr Watson accepted in cross-examination that his schedule, and the schedule prepared by Mr Hope, were inconsistent with his assertion in his witness statement that he would set TOC's higher prices at between half and full selling price of the other retailers.
180. Evidence was adduced, on behalf of TOC and Mr Charlton, of the advertising practice of other retailers selling at discount prices. I understand that TOC and Mr Charlton rely upon such evidence, at least in part, to support their contention that an ordinary reasonable consumer would not have regarded TOC's notices as making the implied representations which the OFT alleges, or, possibly, that even if the notices did make those implied representations the ordinary reasonable consumer would not have been deceived by the notices. I reject those arguments.
181. In the first place, as I have already said, TOC itself accepts that the class of customers to whom the "70% off" advertisements were addressed would have included persons with little knowledge of the practices of such other retailers. In Director General of Fair Trading –v- Tobyward Ltd [1989] 1 WLR 517, 521 f-g, Hoffman J said, in relation to the concept of "deception" in Reg. 2(2) of the Regulations:

"In my judgment in this context there is little difficulty about applying the concept of deception. An advertisement must be likely to deceive the persons to whom it is addressed if it makes false claims on behalf of the product. It is true that many people read advertisements with a certain degree of scepticism. For the purpose of applying the regulations, however, it must be assumed that there may be people who will believe what the advertisers tell them, and in those circumstances the making of a false claim is likely to deceive."

182. Second, there is no evidence before the Court that any retailers, or at any event any significant number of other retailers, use, or have used, a comparable strategy of a permanent large fixed percentage discount applicable to all or the vast majority of the retailer's goods.
183. Third, I can see no reason to assume, from the fact that other retailers operate and advertise price discount schemes involving a comparison between "was" and "now" prices, that consumers were not or were not likely to have been misled by TOC's notices promoting the "70% off" strategy. In some cases, the notices of other retailers, as well as TOC's notices, will have deceived and misled one or more consumers. In other cases, one or more consumers may not have been misled by the notices of other retailers, but may have been misled by TOC's notices. In short, I cannot see the basis for making any assumption in favour of TOC's notices by reason of the advertising practices of some other retailers.
184. Subject to the points made by TOC about the practice of other retailers, it has not been disputed that, if I were to conclude that TOC's notices promoting the "70% off" strategy were deceptive, I should also conclude that, by reason of their deceptive nature, the notices were likely to affect the economic behaviour of the persons to whom they were addressed for the purposes of Reg. 2(2) of the Regulations; that is to say, it would make it more likely that such persons would purchase the goods. The whole purpose of the "70% off" strategy was to influence consumers' economic behaviour by conveying the impression to the consumers that they were getting a tremendous bargain. In Tobyward Hoffman J said, at pp. 521-h s.225, that the condition in Reg. 2(2) of the Regulations that the advertisement is likely to affect the economic behaviour of the persons to whom it is addressed "means in this context no more than that it must make it likely that they will buy the product. As that was no doubt the intention of the advertisement, it is reasonable to draw the inference that it would have such a result".
185. It follows that TOC's notices promoting its "70% off" strategy were misleading advertisements within the meaning of the Regulations.
186. It is not in dispute that, if TOC's notices contravened the Regulations, they also constituted Community Infringements for the purposes of EA 2002, that is to say they harmed "the collective interests of consumers".

Relief

187. The OFT seeks injunctive relief against TOC and Mr Charlton in the form of a draft order which has been placed before the Court.
188. TOC and Mr Charlton submitted that, even if TOC's notices promoting the "70% off" strategy were misleading, the Court should not, on the facts of the present case, exercise its discretion to grant an injunction. TOC and Mr Charlton rely upon a range of matters in support of that submission. They claim that the "70% off" strategy was operated without complaint from the OFT for over 9 years, even though the Regulations came into force some 17 years ago. They claim that TOC has always co-operated with its "home" TSD, Northumberland, in relation to the "70% off" strategy and appropriate signage. Northumberland TSD has never instituted any proceedings against them under Part III of the CPA; nor has any other TSD ever prosecuted them under Part III for promoting generally the "70% off" strategy. They claim that many other retailers have for many years used similar forms of marketing, and that the targeting of TOC and Mr Charlton in the present proceedings is arbitrary and selective. An injunction, they say, would represent a disproportionate and discriminatory measure, placing potential additional restrictions on TOC, to which its competitors are not subject. TOC has, in any event, ceased to promote the "70% off" strategy, and says that it would abide by any declaratory judgment, just as it has always intended to comply with the law. Further, TOC says that the terms of the proposed injunction are unduly wide, vague and subjective, the lack of clarity both exposing TOC and Mr Charlton to the unacceptable risk of the severe repercussions of a breach of the order and also being likely to cause TOC to be more cautious that its competitors and so unfairly prejudicing its commercial interests.
189. The OFT does not acknowledge the validity of any of those points. It emphasises, moreover, that the Regulations envisage that the primary remedy for the publication of misleading advertisements is the grant of an injunction, and also that TOC has refused to give an appropriate undertaking not to issue misleading advertisements in the future.
190. Reg. 6(1) of the Regulations provides that, before granting an injunction, the Court should have regard to all the interests involved and in particular the public interest. It is clear that, both by virtue of that express provision and also the discretionary nature of an injunction, the Court has a discretion whether or not, on the facts of any particular case, to grant an injunction in proceedings in which the OFT has established that the defendant's advertisement is misleading.
191. In view of the various matters raised by TOC and Mr Charlton for resisting an injunction, including legitimate concerns that the order should be clear and precise as to what cannot be done and that the order should be no wider than necessary, so that a proper balance is achieved between the public interest in preventing the publication of misleading advertisements and the legitimate commercial interests of TOC to carry on business lawfully in a competitive market, the parties agreed, at my suggestion, that submissions as to the appropriateness of the injunction and as to the terms of any injunction should not be made prior to the handing down of this judgment. I shall direct a further hearing at which submissions on those points can be made.

Decision

192. I find that TOC's notices promoting the "70% off" strategy were misleading advertisements for the purposes of the Regulations, and their publication was a Community infringement within part 8 of EA 2002.
193. I shall direct a further hearing to determine the relief to be granted to the OFT and the form of the order.