CAR INDUSTRY BEWARE: ENTRY PRICE SHOULD INCLUDE DELIVERY COSTS!

Car industry beware: entry price should include delivery costs! The Board of Appeal of the Advertising Code Committee rendered an important ruling on stating prices in car advertising on May 11, 2012.

In the car industry it is common for advertisers to state an entry level price exclusive of the delivery costs. Kia is no exception. The Kia Picanto was promoted in a television commercial and on the Kia website as "Available from EUR 7,995". A complaint was filed with the RCC: the car could not be bought for that price. Delivery costs of about EUR 700 would inevitably be added.
The Board holds that the advertising of Kia qualifies as an invitation to purchase. In case of an invitation to purchase, the following information must be given:

“The price, including taxes, or, if the product is such that the price thereof cannot reasonably be determined beforehand, the way the price is determined and, if the case may be, all supplementary freight costs, delivery or postage costs, or if these costs cannot reasonably be determined beforehand, the fact that these supplementary costs will possibly have to be paid.”

The Board considers that an invitation to purchase should always mention the "total price", i.e. a price in which all costs are included to the extent that these costs (1) can be determined beforehand, (2) are non-avoidable and ( 3) are not apparent form the context of advertisement. If these requirements are met, it should be examined whether the advertisement entices or may entice the average consumer to make a decision on a transaction which he would otherwise not have made. If so, this constitutes a misleading omission.

The entry level price of Kia is exclusive of delivery costs and various other costs (including administrative charges and disposal contribution). The Board assumes that the height of all those costs was known at the time of publication of the advertisement, and considers that those costs should have been included in the advertised price. Because the delivery costs are considerable, and lead to a "significantly higher purchase price", the consumer may be enticed to make a decision that he had not taken if he had known the correct total price. The Board designates the omission of the correct total price as a misleading omission, and recommends Kia to discontinue this way of advertising.

I think it is far-reaching to qualify a car advertisement featuring an entry level price as an invitation to purchase. The decisive factor is whether the information on the product advertised and its price is sufficient for the consumer to be able to make a transactional decision. It seems to me that this can vary from product to product. In case of cars I would say the condition is not easily met. Buyers of cars will find car options important, not to mention driving experience. This information is not clear from the advertisement. You gain that information by making a test drive, not by watching a television commercial. Or would the average consumer buy a car just as careless as the protagonist in this commercial?

As for now the car industry will have to deal with this ruling. According to the Board "apparently there is a misconception within the relevant industry regarding information obligations if there is an invitation to purchase. (...) The Board (...) assumes that the industry will take notice of this ruling and will adjust its advertising on television and the internet. "

Voilà.

Daniel Haije

Hoogenraad & Haak advocaten

office
Emerald House
Jozef Israëlskade 48-G
Amsterdam, the Netherlands
t +31 (0)20 - 305 3066
www.hoogenhaak.nl

post
PO Box 76780
1070 KB Amsterdam
e info@hoogenhaak.nl
f +31 (0)20 - 305 3069
chamber of commerce 34314579

CAR INDUSTRY BEWARE: ENTRY PRICE SHOULD INCLUDE DELIVERY COSTS!