Australian Competition and Consumer Commission v Terania Pty Ltd [2008] FCA 732

  • Future representations must have proper representation and some basis in fact.
  • Claims to the effect that a sale must end by a certain date are not mere puff.

We have all seen these advertisements for clearance sales of goods held at town halls, sports grounds and similar venues: "All stock must go", "Last days", "Business closing down", "No reasonable offer refused". When are these statements misleading and deceptive?

These proceedings concerned sales events for rugs and manchester in Darwin and Canberra by Terania and a related company. Advertising for these sales events included statements which were misleading and deceptive that:

  • the sales would end at particular dates and times; by
  • the completion of the sale they would sell or otherwise dispose of their entire stock of rugs; and
  • the goods in question had previously been offered for sale at original price, so that the sale price represented a significant reduction from the normal retail price.

Terania acknowledged that, at the time it made the representations it did not have reasonable grounds for making those representations which were misleading or deceptive conduct.

The court agreed and also noted that misleading representations as to price were highly likely to mislead consumers. Justice Mansfield noted that members of the public do not routinely know the normal retail price of particular goods, a price which may depend on the quality of the particular goods, which in turn may also not be readily apparent to some members of the public. It was not merely the gullible who may regard a "was" price as a real indication of the normal retail price of particular products.

He thought that the representations as to the duration of the sales events were also misleading as they might induce purchases within or by the specified time. The concern would be that the goods would not be on offer at that "sale" price after the sale.

Whether the representations that the stock must be cleared were misleading was a more difficult question. Justice Mansfield noted that there was room for different opinions. In Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459, Justice Gyles said:

"Reading the numerous cases in this field makes it perfectly apparent that individual judges vary considerably in their assessments of the effect of advertising. Some take a robust view and credit consumers with a fair amount of cynicism about advertisements and a fair amount of ability to make their own judgments. Others are convinced of the power of advertisements and are protective of the consumer. Neither side is right or wrong – it is a matter of opinion."

He noted that there the case law recognised that what is called "puffery" or exaggeration in advertising is not unexpected. However, the lure of below "sale" prices which the clearance representations offered was to get attendance at the "sale" for the opportunity of effecting further sales of products. Accordingly, Justice Mansfield thought that the clearance representations extended beyond mere puffery.

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