Six major high street and furniture chain shops are under investigation by the Office of Fair Trading over claims they used artificially high prices to exaggerate sales and price cuts.
The OFT said it opened the investigation after suggestions that many retailers in the sector were reportedly misleading customers into thinking they were getting a bargain by inflating the original price.
It said there seemed to be systematic examples of artificially inflated reference pricing within the industry, through the use of "was ... " prices formerly charged by the retailer, "after sale" prices that the trader intended to charge in the future, or recommended retail prices set by the manufacturer.
"Was ..." prices are where the retailer advertises an item as, for example, "was £600, now £300".
The OFT found that during its monitoring of the six companies, just 5% of items were sold at the non-sale price.
There were a significant number of products where no sales at all were made at the higher price. In all cases, no explanation of how and when these higher prices were established were provided.
The OFT has written to the six retailers asking them to stop using the pricing practices that may mislead consumers, giving them until autumn to respond.
Two of the companies under investigation have been named as Carpetright and ScS. Carpetright confirmed it was one of the companies under investigation and that it would co-operate fully with the OFT. It said there was no suggestion that it had broken competition law. ScS said it had no comment to make.
Gaucho Rasmussen, the OFT's director, said: "OFT research has found that reference pricing may mislead consumers into thinking the item they have bought is of higher value and quality, pressure them to buy there and then so they don't 'miss out' on the deal and also impair their judgment, as buying an item immediately means they do not get the chance to search the market for the real best deals.
"We have contacted a number of carpet and furniture retailers asking them to review their pricing practices and sign legally enforceable undertakings.
"This bank holiday sale season we would recommend that consumers ask sales staff when and for how long the reference price was used and also how many sales they achieved at this price. This will help them to determine whether they are getting a good deal."