We all love a good bargain – that sense of accomplishment for purchasing an item less than full price. Businesses leverage the psychology behind bargains and our desire to see the words ‘discount’, ‘sale’ or ‘reduced’ to secure sales. Consequently, retailers employ was/now pricing structures where they display a two-price comparison so that the consumer can see and calculate quickly the savings they make at the ‘now’ price.
There is nothing unlawful about this practice, but businesses often get caught out when they do not provide accurate information regarding their prices. The ACCC has issued Charles Tyrwhitt LLP, a London-based clothing manufacturer and retailer, a $10,800 penalty for their misleading was/now pricing practices.
Charles Tyrwhitt and Was/Now Pricing
Although Charles Tyrwhitt is a London-based business, they advertise their clothing to Australian consumers through online channels and print catalogues or magazine inserts Australia-wide.
False or misleading representations are a breach of the Australian Consumer Law. The ACCC issued the infringement notice on the basis that they believed on reasonable grounds that Charles Tyrwhitt’s ‘was’ price for men’s ‘slim fit non-iron micro-spot white’ shirt was false or misleading.
The Charles Tyrwhitt website displayed slim fit shirts with a ‘was’ price of $160 and a ‘now’ price of $69, causing consumers to believe that they would save $91 when they purchased the shirt at the ‘now’ price. The ACCC found, however, that the retailer had not ‘genuinely offered’ the shirt at the ‘was’ price of $160 for a reasonable period. Charles Tyrwhitt had advertised the shirt for $160 only for a short period, and on a section of the site that consumers could not easily access.
Was/Now Pricing Under the Australian Consumer Law
Was/now pricing is a legitimate practice for businesses to attract customers, provided the savings offered are genuine. If a retailer doesn’t offer the ‘was’ price for a reasonable period, and if no consumer purchases the item at the ‘was’ price, they aren’t actually making the advertised saving, and it would be misleading to make them think otherwise.
One of the key factors in considering whether a was/now representation is misleading is the length of time that the business offered the ‘was’ price. This doesn’t require the retailer to have sold the product, but they must show that they offered and advertised the product at the ‘was’ price for a reasonable time.
In this situation, the ACCC was not convinced that the short period for which Charles Tyrwhitt advertised the $160 shirt price was long enough to be a genuine offering. The fact the retailer advertised the price in an obscure location on the site, and that no consumers purchase the shirts at that price strengthened the ACCC’s opinion.
Using the Was/Now Pricing Marketing Tool
Consumer legislation does not prohibit businesses using comparative advertising like was/now pricing to attract customers. The ACL does, however, set parameters within which businesses can engage in these types of practices.
Businesses should keep in mind that price advertising and low ball offers are not tactics to be used to attract consumers at any cost (both literally and figuratively). Remember that while the ACL provides for creative marketing techniques, it does not allow for businesses to mislead consumers.
Understanding the ACL will help businesses develop compliant marketing and advertising practices. Retailers should maintain comprehensive records of the ‘was’ pricing so that there is no question of whether it was a genuine offer. Likewise, consumers should know their rights under the ACL to avoid businesses lax with their ACL obligations taking advantage of them.
The ACCC also took this case as an opportunity to remind international companies that they are not exempt from the ACL. If they supply to Australian consumers, the ACL protects their consumers, and they must comply.
If you have any questions about your obligations under Australia’s Consumer Law, get in touch with our consumer lawyers on 1300 544 755.