As a retail business owner, you are responsible for many regulatory and compliance issues, including ensuring you accurately price your items. Unfortunately, a business may incorrectly price an item in the day-to-day rush. When this happens, retailers and consumers are often unsure of their legal obligations and rights and whether they must sell their goods at the erroneous price. This article explains when a retailer must honour incorrectly priced items.
Pricing Obligations in the Australian Consumer Law
In Australia, the Australian Consumer Law (ACL) governs consumer law and practices. The ACL requires prices to be clear and correct so that they do not mislead consumers and to represent the total price of the product or service. Additionally, advertisements must not leave consumers with a false impression regarding pricing.
Correct pricing is important because accurate prices help consumers make informed decisions in the marketplace. The ACL puts these consumer protections around pricing into place because consumers generally have less power than large retailers. In ensuring clear rules about pricing and pricing practices, the ACL deters businesses from engaging in less-than-ideal pricing practices.
For example, suppose a company is selling television sets and decides to have a sale. They advertise the sale price at $700 and claim that the original price was $900. However, they have always sold their television sets for $700. The $900 original price was false advertising to make potential consumers believe they were purchasing at a bargain. The ACL prohibits this practice, as it deceives the consumer who relies on the retailer for their information.
Products Displayed With Incorrect Price
If a retailer incorrectly prices one isolated product, it is likely an error. A retailer can follow their individual store policy to address the mistake in these cases. This means a store may or may not honour incorrectly priced items depending on their policy and will not have to sell the product at the wrong price. Store policies are usually displayed at the cash register or contained in terms and conditions (for online businesses).
Particular codes of practice may guide some stores’ policies. For example, Woolworths is a signatory to the Code of Practice for Computerised Checkout Systems in Supermarkets. This Code outlines specific procedures a store must follow for incorrectly priced items. For example, suppose a customer scans an item in Woolworths for a higher price than the price listed on the shelf. In that case, the customer can receive the item free (assuming the look-up number is correct). The Code is voluntary and aims to ensure that supermarket scanning systems do not diminish consumer rights.
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Products Displayed With Multiple Prices
If a retailer displays an item with multiple prices, they must sell the product at the lower of the marked or displayed prices. If they do not wish to do this for commercial reasons, they must withdraw the good from sale until they correct the price. This rule also applies if a retailer advertises a product at multiple prices. However, a retailer does not have to sell a product at the lowest advertised price or withdraw it from sale if in the advertisement:
- the retailer states that prices will vary by region;
- another price completely obscures the relevant price;
- the retailer provides a unit price; or
- the retailer gives the price in a foreign currency.
If a retailer wishes to change the displayed price of a product in a catalogue or advertisement, they must:
- retract the display price; and
- publish the retraction to have a similar circulation or audience to the advertisement.
‘Two-Price Comparison’ Advertising
Retailers should exercise caution when advertising prices in a ‘two-price comparison’ manner. This kind of pricing includes:
- a retailer advertising a previous price with ‘was/now’ or ‘strike through’ or specifies a dollar amount or percentage saving;
- cost or wholesale price;
- competitor’s price; or
- the recommended retail price.
Misleading advertising is an offence under ACL, regardless of whether the retailer intended to mislead customers. Therefore, retailers must exercise due caution. As their intention is legally irrelevant, a retailer can breach the law even though they believed the statement was true when they made it. The ACCC recommends that businesses keep complete records substantiating all two-price comparison claims.
Misleading Drip Pricing Practices
Retailers must be upfront and disclose the full price of a product or service, including extra fees. ‘Drip pricing’ is when a retailer advertises a price at the beginning of an online purchase but adds additional charges (such as booking and service fees) through the purchase process, resulting in consumers paying more than initially intended. This may amount to misleading or deceptive conduct under the ACL if retailers do not disclose the types of fees that will apply and when at the start of the purchasing process.
Key Takeaways
If incorrectly priced items mislead consumers, this is a serious offence under the Australian Consumer Law. Generally, if a retailer displays multiple prices, they should honour the lower price. Similarly, using ‘two-price’ comparison pricing may be misleading, and retailers should exercise caution by keeping comprehensive records that justify such comparative claims. Pricing may also be misleading where there is ‘drip pricing’ and retailers cause consumers to pay more than they expected. However, if an isolated product is incorrectly priced, a retailer often has the option of following their store policy. Overall, retailers should consistently exercise best practice and clearly display their sales terms and conditions at the register.
If you need help pricing your products correctly, our experienced advertising compliance lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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