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Like so many industries today, the retail world moves fast.  And sometimes, in the day-to-day rush, a business may incorrectly price an item. When this happens, retailers and consumers are often unsure of their legal obligations and rights, and whether they must honour the pricing error. In this article, we explain when a retailer must honour incorrectly priced items.

Pricing Obligations in the Australian Consumer Law

In Australia, consumer law is principally governed by the Australian Consumer Law (ACL).  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 as regards 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 compared to large retailers. In ensuring that there are clear rules about pricing and pricing practices, the ACL deters businesses from engaging in less-than-ideal pricing practices.

For example, suppose a company was selling television sets and decides to have a sale. They advertise the sale price at $700, and advertise that the old price was $900. However, they have always sold their television sets for $700, and the $900 was made up to make consumers think they were getting a good deal. This would not be allowed under the ACL, as it would deceive consumers, who generally have less information than big retailers and would be more likely to believe that they were getting the product on sale.

Products Displayed With Incorrect Price

If a retailer incorrectly prices one isolated product, it is likely an error. In these cases, a retailer can follow their individual store policy to address the mistake. This means that 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).

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Some stores’ policies may be guided by particular codes of practice. For example, Woolworths is a signatory to the Code of Practice for Computerised Checkout Systems in Supermarkets. This Code sets out certain procedures that a store must follow in the event of incorrectly priced items. For example, if a customer scans an item in Woolworths for a higher price than the price listed on the shelf, the customer is entitled to 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.

Note: If a retailer deliberately prices an item incorrectly, this may amount to misleading or deceptive conduct. As a result, the Australian Competition and Consumer Commission (ACCC) may initiate legal action. 

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 holds true if a retailer advertises a product with 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 so that it has a similar circulation or audience to the advertisement.

‘Two-Price Comparison’ Advertising

Retailers should be careful of 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.

This kind of advertising can easily mislead customers as to the savings they can achieve. For example, a ‘was/now’ advertisement could mislead a consumer if the retailer did not sell the product at the ‘before’ price in a reasonable period before the sale.

As misleading advertising is an offence under ACL, regardless of whether the retailer intended to mislead customers or not. Therefore retailers must exercise due caution. As their intention is legally irrelevant, a retailer can breach the law even though they may have believed the statement was true when they made it. The ACCC recommends that businesses keep complete records that substantiate all two-price comparison claims.  

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. However, if an isolated product is incorrectly priced, a retailer often has the option of following their store policy. Therefore, retailers should clearly display their sales terms and conditions at the register. If you need assistance with setting up pricing terms and conditions, call LegalVision’s advertising compliance lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

I mistakenly priced an item. Do I have to honour the mistaken price?

Generally, if the mistake was genuine and did not mean to deceive customers, you will not be obligated to honour the mistaken price. However, you will have to follow your store policy regarding whether you honour incorrect prices.

I want to conduct a sale at my business, which involves changing my pricing. Is this allowed?

Yes, but ensure that you are being accurate in all of your pricing representations. For example, if you are selling a coat with the advertisement “Was $70, now $50”, you must have previously sold the coat at $70. You cannot mislead your customers as to the actual price of the coat before the sale.

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