Australia: Renewed focus on dual-price advertising and false or misleading representations

Last Updated: 14 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.

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 article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.