Comparative pricing is a powerful sales tool. However, many
franchisors, retailers and suppliers are currently using it
incorrectly and are unknowingly at risk of prosecution for
breaching the Trade Practices Act (TPA).
Comparative pricing is commonly seen in the following forms:
straightforward comparisons, such as "was $X, now
strikethrough comparisons, such as
"$X $Y"; and
percentages discounts, such as "X%
As recently stated by Acting Chairman of the ACCC Mr Peter Kell,
when using comparative pricing, "...retailers must ensure that
the claimed savings are genuine or they run a serious risk of
breaching the law". Specifically, if retailers use comparative
pricing incorrectly, they may engage in misleading or deceptive
conduct (or conduct that is likely to mislead and deceive), or make
false price representations, in breach of sections 52 and 53(e) of
the TPA respectively.
The ACCC recently investigated Furniture and Bedding Concepts
Ltd (FBC) in relation to its use of comparison
pricing. FBC operated 107 retail furniture stores and had used
"was/now" advertisements in its national catalogue.
However, FBC based its "was" price on recommended retail
prices set internally, rather than the actual prices at which the
relevant products were sold prior to the sale. Following an ACCC
investigation, FBC agreed to enter into a range of enforceable
undertakings, including to display corrective advertising, publish
an information notice in an industry magazine, implement a TPA
compliance program and offer $100 gift vouchers to the affected
To ensure that your advertising does not fall foul of sections
52 or 53(e) of the TPA, consider the following questions before
going to print. If the answer to any of these questions is
"no", you should revise the advertisement or seek legal
Is the "higher" price a genuine pre-sale
price, and the actual price at which the products are offered
immediately prior to the promotion?
Many retailers use the recommended retail price
(RRP) as the "higher" price without
giving this issue much thought. However, unless the relevant
products were ordinarily sold at the RRP prior to the promotion
commencing, it should not be used as the basis for the
Explicitly stipulating that the comparison is based on the RRP (for
example, "20% off the RRP") will not protect a
retailer from breaching the TPA if products were customarily sold
below the RRP.
Were the relevant products sold to customers at the
higher price for a "reasonable" period before the
In determining this, consider things such as the expected
shelf life of the product and ordinary price fluctuations.
Were the products sold at the "higher" price
for a reasonable period before the advertising campaign atalloutlets?
Using comparative advertising in the context of a
franchise or independent dealer network is especially difficult and
in some cases may not be appropriate. Other than in very specific
and limited circumstances, franchisors or suppliers to dealer
networks cannot dictate prices, agree on prices with their
franchisees or dealers, or facilitate the making of agreements
regarding price between franchisees or dealers who may be
competitors. Accordingly, establishing that products are sold by
franchisees or independent dealers at the "higher" price
for a reasonable period before the advertising campaign can be very
Is the "lower" price only available for a
The lower price must be a temporary price. That is, the
promotion should not operate for a longer period than the products
were available at the "higher" price.
In short, comparison pricing should never be used to make
savings look bigger than they actually are. Businesses must ensure
that any discount specified is real and not illusory.
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.
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