Renewed focus on dual-price advertising

Subscribe
6 December 2013

The Jewellery Group Pty Ltd (Zamel’s) v Australian Competition & Consumer Commission [2013] FCAFC 144

The Federal Court’s decision against Zamel’s reinforces that business must take caution when utilising a dual-price advertising strategy, or risk being subject to significant penalties.
In particular, businesses must be careful to accurately represent to consumers the savings that are being offered, whether the representation is by way of discounts off a “was” price, or by way of “savings” during the promotional period. 
To the extent that businesses seek to refer to a “was” price, they must ensure that such a price was actually offered by the business, and was a price that the “ordinary” or “reasonable” consumer would have paid, for the product in the immediately preceding period. 

The Federal Court’s decision against Zamel’s reinforces that business must take caution when utilising a dual-price advertising strategy, or risk being subject to significant penalties.

In particular, businesses must be careful to accurately represent to consumers the savings that are being offered, whether the representation is by way of discounts off a “was” price, or by way of “savings” during the promotional period. 

To the extent that businesses seek to refer to a “was” price, they must ensure that such a price was actually offered by the business, and was a price that the “ordinary” or “reasonable” consumer would have paid, for the product in the immediately preceding period. 

On 29 November 2013, Greenwood, Besanko and Katzmann JJ dismissed the appeal and upheld the trial judge’s decision that Zamel’s made false or misleading representations in its dual-price advertising, in contravention of the then Trade Practices Act 1974 (Cth) (provisions which are substantially replicated at sections 18 and 29 of the current Australian Consumer Law). In doing so, the Full Bench of the Federal Court affirmed the Court’s approach to dual-price advertising and how the law applies to industries where discounting is common practice.

The decision is one of the many consumer law cases the ACCC has brought in recent years, recognising that the effective enforcement of consumer laws is as important as the effective enforcement of restrictive trade practices laws in achieving the economic policy outcomes set out in the Act. It also demonstrates that dual-pricing remains on the ACCC’s enforcement radar.

THE DECISION AT FIRST INSTANCE

The ACCC’s allegations concerned the appellant (Zamel’s) dual-price advertising for 44 of 55 items of jewellery advertised in its May 2010 catalogue and 20 of those items in other advertisements during November 2008 to January 2010.

Zamel’s did not sell, or rarely sold, the 44 items at the higher price due to its vigorous discounting policy, which authorised staff to give significant discounts of between 10-35% in store. Some customers were aware of the potential for significant discounts and others were not.

The trial judge held that the advertisements were aimed at a substantial number of consumers (300,000 copies of the catalogue were printed) who were not aware of the potential for significant discounts off the listed price. As a result, those customers would have expected to save the difference between the two prices as a result of the sale. Accordingly, Zamel’s conduct:

  • was misleading or deceptive, or likely to mislead or deceive; and
  • amounted to false or misleading representations in relation to the price of the goods.

Zamel’s was ordered to:

  • pay pecuniary penalties totalling $250,000;
  • publish corrective advertising;
  • establish a compliance and training program; and
  • pay the ACCC’s costs.

THE DECISION ON APPEAL

Zamel’s unsuccessfully argued that the “was” price should be considered as an “offer” or invitation to treat rather than the actual price of the item for sale.

The Full Bench accepted that some customers were aware of the potential to obtain a significant discount from the list price. However, the Full Bench considered that the number of ordinary and reasonable customers who were not aware of the potential for the discount were substantial and that Zamel’s advertising had targeted those customers.

In addition, Katzmann J held that by showing the difference between the prices as a percentage saving, Zamel’s had clearly intended its target audience to understand that saving could be achieved by purchasing the product.

Zamel’s argued that there was no evidence of actual consumer deception brought by the ACCC. However, the Full Bench affirmed that evidence of this kind is not a pre-requisite to provide that a representation is “likely” to mislead or deceive or is false.

Finally, Zamel’s attempted to challenge the assessment of the “was” price against a four month period before the sale. However, the ACCC successfully established the appropriateness of this period as it:

  • broadly aligned with the periods between regular sales held throughout the year; and
  • immediately preceded the relevant catalogue sale period.

IMPLICATIONS AND NEXT STEPS

Prior to the publication and distribution of dual-price advertising, businesses need to carefully consider how, as part of their sales practices and any discounting policies, they represent any savings the consumer is purported to make, including by way of representations as businesses’ “was” or “strikethrough” price.

Businesses must be especially cautious when referring to a “was” or “standard” price in circumstances where they conduct rolling promotions involving discounts or free additional features, as these businesses would have difficulties substantiating that the “was” price was genuinely offered to consumers in the preceding period. 

In addition, the Court’s decision indicates that a “was” price:

  • must be determined by looking at the immediate pricing history of the product, excluding regular sales;
  • is the price an “ordinary or reasonable” consumer would have paid for the product in the immediately preceding period; and
  • may still be used where there are no sales in the immediately preceding period, as long as the company can substantiate their position as to what an ordinary or reasonable consumer would have paid for the product during this time.

Businesses can mitigate these risks by implementing a process by which any promotions that utilise a dual-pricing advertising strategy are systematically reviewed and approved to ensure that they legitimately represent the savings consumers will make, and, unlike Zamel’s, do not fall foul of the ACL. 


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


Related Content