Advertisement of prices: the Mexican experience México Advertisement of prices: the Mexican experience International Consumer Protection and Enforcement Network (ICPEN) The Hague, Netherlands, April 2011

I n d e x Introduction Legal framework Common Mexican “advertising of prices” practices Enforcement experiences Preventive actions Final considerations

Introduction BACKGROUND Competition is necessary for well functioning markets. Fair marketing or price strategies may enhance competition. On the other side, businesses and advertisers seem to have similar behavior all around the world. In Mexico, as in other countries, there are pricing strategies that can harm consumers interests. An adequate price framing allows consumers to asses the value of the offer. An unfair price framing disturbs people’s perception of the value of an offer. The Hague, Netherlands, April 2011

Legal framework LAW The Federal Consumer Protection Law foresees general and specific dispositions concerning advertising, such as: Chapter III “Information and advertising”. Chapter IV “Promotions and offers”. The Hague, Netherlands, April 2011

Legal framework ADVERTISEMENT Article 32 of the FCPL establishes that the information and advertisement shall be: Truthful Verifiable Exempt of text, dialogues, sounds, images, trademarks, designation of origin and other descriptions that lead or may lead to mistake or confusion by being either deceptive or unfair. The Hague, Netherlands, April 2011

Legal framework TOTAL AMOUNT VS DRIP PRICING Article 7 bis establishes “The supplier is bound to exhibit, in a prominent manner, the total amount to be paid for the goods, products, or services such supplier offers to consumers”. The total amount must include taxes, commissions, interest rates, insurance, cost, or any additional charges that must be paid because of buying… in credit or in cash operations. Principles: Prices must include any additional charge. Forbidden to apply “plus VAT”. As concerns partial payments, not enough to mention price to pay, must indicate total amount to be paid. The Hague, Netherlands, April 2011

Legal framework PROMOTIONS AND OFFERS VS BAITING SALES Article 48 establishes rules for promotions and offers as follows: Clear indication of the following: Conditions. Period of time. Said volume evidenced (volume of stock). If volume and time of period are not evidenced, it is expected they are unlimited. Consumers meeting requirements, shall be entitled to acquired the offer. The Hague, Netherlands, April 2011

Practices: Total amount vs drip pricing Drip or partitioned pricing Deceptive and confuse advertising since you can understand 3 different prices. “Applies a charge because of the expedition of the electronic ticket of USD $16 dollars, VAT included”. The Hague, Netherlands, April 2011

Practices: total amount vs drip pricing Example with the total amount to be paid, including additional charges mentioned in the restrictions. “Includes a charge because of the expedition of the electronic ticket of USD $16 dollars, VAT included”. If it is purchased in Aeromexico.com, it may vary depending on where it is bought“. The Hague, Netherlands, April 2011

Practices: total amount vs drip pricing Example of different possible plans to pay without mentioning the total amount to be paid in each plan. The Hague, Netherlands, April 2011

Examples clearly stating period of time, product and conditions Practices Examples clearly stating period of time, product and conditions The Hague, Netherlands, April 2011

Practices Example that does not present purchase receipts and do not mention vs who they are comparing prices. The Hague, Netherlands, April 2011

Enforcement GUIDELINES Profeco has as remit, the possibility to issue guidelines to verify the advertising and avoid consumers to be mislead. Profeco published in the Official Gazzette of the Federation, in October 2009, Guidelines for information or price comparisons. Several conditions identified for practicing fair price comparisons. The Hague, Netherlands, April 2011

Enforcement TOOLS Corrective actions BREACHES TO THE GUIDELINES When comparing prices, it is not done with respect to goods of the same brand, pattern, presentation and content. Compared products, services and packages are not identical. Purchase receipts are not shown or mentioned. Purchase receipts are not from the last five days. It does not include the legend: “To date, the compared price may have changed”. TOOLS Corrective actions Exhort: invitation to modify publicity. Requirements: to substantiate veracity. Procedures regarding law infringements. The Hague, Netherlands, April 2011

DIALOGUE WITH BUSINESES Good corporate image means clients Preventive actions DIALOGUE WITH BUSINESES Good corporate image means clients A fair marketing campaign avoids legal action and spending money in corrective actions Review promotional advertisement to stay compliant with the law Free training to the private sector COPY ADVICE (PREVIOUS REVISION) Authority to provide its legal opinion about campaigns not in use yet. The Hague, Netherlands, April 2011

Preventive actions Before the Copy advice The Hague, Netherlands, April 2011

Preventive actions After the Copy advice The Hague, Netherlands, April 2011

Fair pricing techniques avoids economic harm to consumers. Final considerations LESSONS LEARNT Fair pricing techniques avoids economic harm to consumers. Strong and decisive actions against breaches, serves to real equal conditions in competition. Bundling may cause “complex offers”, so special attention should be given, in the future, to telecomm sector. Good enforcement actions requires authorities to analyze particular markets (e.g. telecoms). The Hague, Netherlands, April 2011

Thank you for your attention! México Thank you for your attention! The Hague, Netherlands, April 2011