People purchasing business shirts online from British retailer Charles Tyrwhitt earlier this year might have noticed something a bit odd about their pricing. So too did the Australian Consumer and Competition Commission (ACCC). It recently issued Charles Tyrwhitt with an infringement notice and imposed a penalty for contravening the Australian Consumer Law (Cth) (ACL). This article discusses the matter and outlines how retailers can use ‘was/now’ pricing advertising without misleading consumers.
In the period between February and March 2016, Charles Tyrwhitt advertised online a men’s slim fit non-iron micro-spot white shirt as ‘was previously $160′ and ‘is now $69′. However, subsequent investigation revealed that the retailer advertised that shirt for $160 for only a short period, in a difficult-to-access part of their website. Moreover, no one had actually purchased the shirt at that price. The ACCC issued the retailer with an infringement notice for making a false and misleading representation when it advertised its ‘was/now’ price. It asserted that Charles Tyrwhitt had falsely represented a saving to consumers when they purchased the shirt which did not in fact exist. The ACCC also imposed a penalty of $10,800 on the retailer.
ACL and Misleading Pricing
Consumer law exists in part to ensure that consumers receive clear and accurate information about goods and services in the marketplace so that they can make informed purchasing decisions. To facilitate this, the ACL prohibits businesses from making false or misleading representations about the price of a product or service. Prices should be clear and correct. If they are not, they give consumers a false impression and therefore mislead them. Significantly, a business need not intend, or even know, that it is making a false or misleading representation to breach this provision of the law. Intention is only relevant when determining whether a penalty can be imposed.
In this case, Charles Tyrwhitt was engaging in a type of comparative advertising. Comparative advertising involves comparing the price at which a retailer is offering a product with another price. The other price typically includes a:
- Previous price;
- Cost or wholesale price;
- Competitor’s price; or
- Recommended retail price.
When a business compares a current price to a previous one, it tends to use a ‘was/now’ price formulation or might specify an amount or percentage of savings. For example, in the matter involving Charles Tyrwhitt, the retailer advertised the particular shirt as was $160, now $69.
If a business uses this kind of pricing statement, they must be extremely cautious that they do not, even inadvertently, mislead consumers about the expected savings. The onus for this rests with the business. A ‘was/now’ pricing practice is likely to mislead if the retailer did not sell the product at the ‘was’ price for a reasonable period immediately preceding the start of a sale. There is no fixed threshold for what constitutes a reasonable period – it will depend on the product and the market. A good and a market in which prices frequently change will likely have a shorter reasonable period. Similarly, for another product in a different market with more price stability, a business would probably need a longer period to satisfy reasonable.
This kind of pricing practice could also mislead if only a limited amount of a product’s sales were actually at the higher price in the period immediately before the sale. Again, there are no pre-determined proportion thresholds to define a misleading representation. In this case, not only had the shirt in question been advertised at $160 for a short time in a relatively difficult to locate part of the website, but also the shirt also registered no sales at $160. The representation clearly failed both of the above tests.
Although the ACL does not prohibit was/now advertising strategies outright, suppliers should ensure that they can substantiate any price comparisons. Our consumer lawyers are experienced in advertising clearance and advice for businesses wanting to make sure they are complying with the ACL and can help your business quickly and cost effectively any time you need it. Get in touch on 1300 544 755.