Don't use “was/now” pricing if a single price has not been consistently used.

Boxing Day has nearly arrived. The customary ways to pass the day include watching cricket, regretting the culinary excesses of the previous day or shopping at the Boxing Day sales for items you wanted for Christmas but weren’t actually given. Those who are particularly committed to the festive season might manage all three. If you do find yourself at the Boxing Days sales, you’re likely to be looking for marked-down prices. Marked-down prices can give rise to some complicated legal issues if they take the form of “was/now” pricing.

What is “was/now” pricing?

Broadly speaking, “was/now” pricing is when a product is advertised with two prices: a higher price marked “was” and a lower price marked “now”.

There are many variations to this format. For example:

  • the words “was” and “now” may be omitted and the higher price may just have a line through it; or
  • the word “was” may be omitted and the word “sale” may be used instead of “now”.

Whatever the precise format, the advertisement's intent is to convey to consumers that a product is now being offered for a lower price than it previously was, and encourage them to buy the product now rather than later.

“Was/now” pricing under the Australian Consumer Law

The main issue with “was/now” pricing is the potential for consumers to be misled. This could result in a breach of the prohibition on misleading or deceptive conduct in section 18 of the Australian Consumer Law or of the prohibition on false or misleading representations with respect to price in section 29(1)(i).

These are not the only issues that could arise. For example, there may be a breach of the prohibition on “bait advertising” in section 35 if a retailer is unable to supply the product at the “now” price for a reasonable period of time and in reasonable quantities.

Not sold at the "was" price

“Was/now” pricing may be misleading if the product was not sold at the “was” price at significant quantities for a reasonable period immediately prior to the launch of the “was/now” advertisement. This may occur if the product was actually sold beneath the “was” price.

If the product was offered for sale at the "was" price for a reasonable period immediately prior to the launch of the advertisement but no sales actually occurred, the use of that price in "was/now" advertising may not be misleading, provided the product would have been purchased at that price had someone hypothetically purchased it. If the offered price was actually a starting point for negotiations between the retailer and customers and may have resulted in a lower price being paid by customers following negotiations, the "was" price could be misleading.

Never offered for sale at the "was" price

If the product was not offered for sale at all during a reasonable period prior to the launch of the advertisement, it would be misleading to use a "was" price for that product since it was never offered or sold at all let alone at a particular price.

On sale for a reasonable period before the advertisement

What is a reasonable period prior to the launch of the advertisement? There is no single answer to this question. Periods of 2 months, 4 months and 11 months have been used. The answer depends on factors such as how long it takes "to obtain an understanding of the sales history of the item" and how often the retailer conducts sales. In relation to the latter point, a sales period may distort the normal price for a product and hence the reasonable period should perhaps not extend back so far as to include a previous sales period.

When the "ticketed" price and sale price are different

Things become complicated if the price at which the product was offered for sale (ie. the "ticketed" price) and the price at which it was actually sold are different.

The ticketed price and sale price may be different if the retailer provides discounts from the ticketed price due to a policy of price matching its competitors or if the offered price is a starting point for negotiating a final price. Which price may be used as the "was" price: the ticketed price or the sale price? This issue was considered in Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144.

Jewellery Group Pty Ltd operated the Zamel’s jewellery business, which released catalogues advertising “was/now” pricing for 44 items. The ACCC alleged that the advertisements were misleading because there were no sales of the items, or a very small percentage of sales, at the “was” price in the four months before the sale period.

Zamel’s position was that the “was” price would be regarded by consumers as the price at which Zamel’s offered to sell the items and not the price consumers would have ultimately paid. Since Zamel’s had a policy of “price matching” its competitors and allowed customers to negotiate discounts, customers often paid less than Zamel’s initial, offered price.

At first instance, Justice Lander concluded that the “was” price would be understood by consumers as “a price at which the items could be purchased, not an offer price.” His conclusion was upheld following an appeal brought by Zamel’s. On appeal, Justice Katzmann put the point quite clearly saying “[i]t defies common sense to conclude that … customers … would regard the … ‘was’ figure as anything other than the price at which the jewellery had been sold … Prospective purchasers are interested in the difference between the pre-sale and sale prices; a difference in the value of offers is meaningless to them.”

Making a valid "was/now" price claim

When deciding whether to use “was/now” pricing, a retailer should carefully review what prices it has sold a product for immediately prior to the proposed sale period. It’s unadvisable to use “was/now” pricing if a single price has not been consistently used.

If a decision is made to use “was/now” pricing, records should be kept of how long the product was offered for sale at the “was” price, what other prices were offered during that period, how many sales were made at the “was” price and how many sales were made at other prices. This information may assist in defending any allegation of misleading or deceptive conduct and may also be useful to respond to any “substantiation notice” which the ACCC may issue under section 219 of the Australian Consumer Law.

The principles relating to “was/now” pricing are likely to apply equally to statements about percentage discounts such as “20% off!”