The Federal Court of Australia has handed down an important decision on the practice of 'Was/Now' pricing. The Court held that Prouds Jewellers Pty Ltd (Prouds) had engaged in misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth) because goods had not been offered at the 'was' price immediately before the commencement of the relevant promotion.
ACCC Chairman Graeme Samuel has hailed the decision as a warning of the need for pricing accuracy in advertising materials, stating that 'advertised discounts must be real and not illusory..... If you make a was/now price comparison you must have genuinely offered the product at the 'was' price for a reasonable period immediately before your sale promotion'.
However, the case establishes no more than the goods must have been offered (which in most cases means ticketed) at the 'was' price immediately before the sale date.
Background
The ACCC action concerned 17 jewellery items advertised by reference to 'was/now' pricing in two Prouds catalogues.
However, immediately before the promotion, it appears that the goods were not on display and available for sale at the 'was' price. In fact, Prouds had offered several items for sale at prices less than the advertised 'was' price. So, for example, in the sale that took place in February, the goods in question had last been on display at the 'was' price in December. Further, seven items had never been offered for sale at the listed 'was' price.
The Federal Court Decision
The Court ultimately held that Prouds' conduct gave rise to two misleading representations, both of which related to the price at which Prouds had previously offered (rather than sold) the items:
- The 'was' price was the usual price which the item was offered for sale or sold before the sale. Prouds argued that the 'was' price should be referrable not only to the period immediately preceding publication. That is, they argued it was acceptable to advertise a 'was' price if the 'was' price existed at some point in time before the promotion. His Honour rejected this, holding that it was misleading, 'to identify...a 'was' price which did not represent the price which the item had been offered for sale and would have been purchased by the hypothetical consumer immediately before the sale'.1
-
The items had been offered for sale at the
'was' price before the sale
period.2 His Honour held this
representation was similarly misleading and further found
that Prouds was not concerned as to whether the items had
actually been offered for sale at the relevant
'was' prices prior to the promotion.
The ACCC also claimed that 'was/now' advertising contained further representations, two of which have wider interest:
- Specific items were sold at the 'was' price immediately before the sale period. This was rejected on the basis that the judge, '[did] not think a hypothetical consumer would treat a "was" price as saying anything about the price as which actual sales had been achieved before the introduction of the discounted price'3
- There was a substantial volume of sales before the sale period of the items at the 'was' price. This failed on the basis that the hypothetical consumer would not have contemplated the volume of sales when observing 'was/now' pricing.
It is always dangerous to assume too much about the wider implications of specific misleading conduct cases. However, it is clear that at least in the context of the jewellery industry, where over the counter discounting is widespread and well known by consumers, it may not be necessary to prove that actual sales had taken place at the 'was' price, so long as the 'was' price is genuine.
It is clear that if Prouds had offered the relevant items at the advertised 'was' prices for a 'reasonable period' immediately prior to each promotion, they may have succeeded in defending the application. Indeed, Justice Moore commented that, 'in my opinion there would be no contravention... if the goods had been offered for sale at the 'was' price for a period of two months preceding the sale'. He added, however, that 'there can be no precision about the length of the anterior period', noting that it cannot be 'unduly short' but must be 'a period of substance'4. As always, the 'was' price must be a genuine offer price.
The decision, like any misleading conduct case, turns on its specific facts, so it remains to be seen whether the ACCC will seek to apply the decision beyond the jewellery industry or whether the ACCC will seek to limit its application solely to its precise facts.
A copy of the decision is available here.
Footnotes
1 At [51]
2 This representation related only to one of the catalogues.
3 At [55].
4 At [70].
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.
