Like so many industries today, the retail world moves fast. And sometimes it happens that in the day to day rush a business incorrectly prices an item. When this happens, retailers and consumers are often unsure of their legal obligations and rights respectively. If you are uncertain when a retailer must honour an incorrectly priced product, this article discusses the legalities around retailers and wrong prices.
Pricing and the Law
In Australia, consumer law is principally governed by the Australian Consumer Law (Cth) (ACL) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)).
Pricing is important in the ACL because accurate prices assist consumers to make informed decisions in the marketplace. At law, prices must be clear and correct so that they do not mislead consumers. A price must represent the total price of a product or service. Some retailers are also required to display unit prices on their shelf labels. Further, advertisements for a retailer must not leave consumers with a false impression as regards pricing.
The ACL also includes regulations as to augment consumer protections overall. In the marketplace, it is typically consumers who have less power, particularly vis-à-vis large retailers. In ensuring that there are clear rules about pricing and pricing practices, the ACL bolsters consumers’ rights. It also deters businesses from engaging in less than ideal pricing practices.
The legal danger to a retailer of deliberately pricing incorrectly is that it can lead to allegations of misleading conduct. If the Australian Competition and Consumer Commission (ACCC) reasonably believes that the allegations are true, it could initiate legal action.
That said, consumer law is not inflexible. It recognises that sometimes retailers honestly make mistakes.
Incorrectly Priced Products
If one isolated product is incorrectly priced, it is likely an error. In these cases, it is open to a retailer to follow their individual store policy. For stores, this is usually displayed at the cash register. Online businesses usually have it contained in their ‘Terms and Conditions’.
In short, this means that a store may or may not honour the incorrect price depending on their policy. Of course, a retailer could have a different procedure altogether. For example, if I scan an item in Woolworths for a higher price than the price listed on the shelf, I am entitled to receive the item free (assuming the PLU Number is correct). Woolworths Supermarkets are a signatory to the Code of Practice for Computerised Checkout Systems in Supermarkets (the Code). The Code guides their store policy. The Code is voluntary and aims to ensure that supermarket scanning systems do not diminish consumer rights.
However, if a retailer displays an item with multiple prices, they are legally required to 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 the price is corrected.
This rule also holds true if a retailer advertises a product with multiple prices. However, a retailer is not obliged 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 such that it has a similar circulation or audience to the advertisement.
Final Note on Advertising and Pricing
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
- With 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 if the product was not sold at the before price in a reasonable period before the sale.
As misleading advertising is an offence for which intention is irrelevant in the ACL, retailers must exercise due caution. When intention is irrelevant legally, 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 that substantiate all two-price comparison claims.
If you need further information about pricing and consumer law, the ACCC website is an excellent general resource. If you require tailored legal advice, always speak with a legal professional. Contact LegalVision’s business lawyers to assist you. Questions? Call us on 1300 544 755.