Six leading high street carpet and furniture retailers are under investigation for using artificially high prices to exaggerate sales and price cuts.
The Office of Fair Trading (OFT) said it opened the investigation after finding that many retailers in the sector were misleading customers into thinking they were getting a bargain by artificially inflating the original price.
It found "systematic" examples of artificially inflated reference pricing within the industry, such as the use of "was" prices formerly charged by the retailer, after sales prices that the trader intended to charge in the future or recommended retail prices (RRPs) set by the manufacturer.
During monitoring of the six companies - which the OFT is not yet naming in the hope of reaching a speedy resolution with them - the overall average of sales at the inflated reference price was just 5%.
The OFT said there were a significant number of products sold by some retailers where no sales at all took place at the artificially inflated 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 mislead consumers, giving them until autumn to respond.
The OFT investigation comes ahead of the bank holiday weekend, a busy trading period for home furnishing retailers often marked by heavy sales promotions.
OFT director Gaucho Rasmussen said: "OFT research has found that reference pricing can 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 by 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 in determining whether they are getting a good deal."
Carpetright confirmed it had been contacted by the OFT as part of the investigation. It said: "Carpetright strives to operate fully within all laws and regulations at all times. Carpetright is co-operating fully with the OFT and will respond to the letter in due course."