The Federal Court of Australia has held that a jewellery company engaged in misleading or deceptive conduct in relation to its dual pricing advertisements.

The Australian Competition and Consumer Commission brought the proceeding against The Jewellery Group Pty Ltd, trading as Zamel’s, in relation to a number of catalogues and flyers listing ‘then’ and ‘now’ prices.

Justice Lander found that Zamel’s regularly negotiated discounts with customers outside sale periods and therefore the ‘then’ price was in fact rarely paid. Readers unaware of that practice of discounting would have reasonably interpreted the difference between the ‘then’ and ‘now’ prices as the saving they would make by purchasing the jewellery during the sale period. His Honour therefore found that the represented saving was false and amounted to misleading or deceptive conduct.

The Court will hear the parties as to penalties in December.

The Contravening Conduct

The proceeding related to six catalogues and a flyer that were published and distributed by Zamel’s between November 2008 and May 2010. The ACCC alleged that the savings represented by Zamel’s in those advertisements amounted to contraventions of sections 52 and 53(e) of the Trade Practices Act 1974 (Cth)1.

The relevant audience

The Court accepted that there would be a group of savvy customers who would know that they could always negotiate as to the price of jewellery and therefore would not be misled or deceived by the advertisements. However, it held that the relevant audience also included those who were unaware of this discounting practice, particularly given that the advertisements had been widely distributed through letterbox drops and the internet.

The Court noted that if a retailer has a vigorous ongoing discounting policy, the purpose of dual pricing would be to attract the customers unaware of that policy. It commented that such advertisements would offer little inducement to customers aware of a vigorous ongoing discounting policy, as such advertisements would do no more than signal to those customers that they could purchase the jewellery for the lower price without having to negotiate to it first. In contrast, the unaware customers would understand that they could purchase the items for a lower price during the sales period alone and would therefore be more likely to be induced to purchase during that sales period.

The representation

The Court rejected the respondent’s argument that a reader would interpret the figures as merely representing an offer price. It held that the advertisements represented to customers unaware of the ongoing discounting policy that a purchaser of an item of jewellery in the catalogue or flyer would make a saving of the difference between the two prices.

Conduct was misleading or deceptive

The Court held that the respondent pursued a vigorous discounting policy outside of sales periods and that as a result, the ‘was’ price was rarely paid by a Zamel’s customer. Therefore, a significant number of unaware readers of the advertisements would not have paid the ‘strike through’ or ‘was’ price and achieved the represented saving if they had purchased the jewellery before the sales period.  On this basis the Court held that the savings representation was false and the respondent had engaged in conduct that was misleading or deceptive.

Implications for business

There have been a number of cases in which the ACCC has brought proceedings against businesses who engage in dual pricing advertising. This case serves as another warning to businesses to take great care when engaging in the practice. In particular, businesses that operate in an environment where negotiating and discounting are common practice should ensure that they can demonstrate significant sales at the pre-sale price before engaging in dual price advertising.