Australia: "Was/Now" Price Reductions Found Misleading - Rules For Advertising Price Reductions

Key Point

• When advertising price reductions, to avoid risks of misleading conduct, businesses should ensure that the goods on sale have actually been offered for sale at the "was" price for a period of at least two months preceding the sale period.

Some products - rugs and jewellery are common examples - seem to be prone to exaggerated claims about so-called sale price reductions.

More experienced consumers may place little weight on these claims, which have a reputation for exaggeration - but because other consumers may be misled, the ACCC continues to pursue cases of misleading conduct or false representations where it can establish that the claimed price reductions are not genuine.

Recently, the Federal Court found a number of claims of prices being "was/now" misleading, and gave some useful tips on how to avoid breaching sections 52 and 53 of the Trade Practices Act.

The Mother's Day misrepresentation

Two Mother's Day jewellery catalogues made 17 claims about the savings available on selected items.

Some of the sale items had never in fact been offered for sale at the claimed "was" price, while others had not been sold at that price for at least four months prior to the sale, having been sold at lower prices than that claimed as the "was" price immediately prior to the sale period.

In considering what a hypothetical reasonable consumer might interpret from a claimed "was" price, the Court put aside those consumers who were aware that discounting and bargaining is a regular feature of the jewellery industry and that it is frequently possible to purchase jewellery for less than the advertised ticketed prices.

Business does not need to show that the items on offer were actually sold at the higher "was" price prior to the sale, as long as it can show that they were offered for sale at that price in the period immediately prior to the sale.

This places a significant burden on business to make sure that their advertising of sale promotions is accurate and that any claims about the product being sold, particularly in relation to price, can be proved by evidence.

The Court rejected the claim that it was good enough to show that the item in question had been offered at the "was" price at some "comparatively approximate point in the past" such as four months before the sale. It ruled that the juxtaposition of "was/now" pricing implied a representation relating to the price at which the item could have been purchased immediately before the sale commenced.

What you should do?

There have been a number of ACCC challenges over so called dual pricing by advertising in catalogues, particularly where the sale items had been sold before the sale at significantly lower prices than those claimed to be the "was" price.

Any retailer contemplating dual pricing claim of this kind should do their homework on the price reductions and make sure they have a satisfactory trail to prove the actual prices at which the goods on sale had been offered immediately prior to the sale period, taking into account the minimum two month period suggested in this decision. The ACCC is likely to continue to be vigilant about this area especially where retail consumer products are concerned.

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.