As previously reported in posts in November 2012 and January 2013, Justice Lander in the Federal Court found that the Jewellery Group Pty Ltd (trading as Zamel’s) made false or misleading representations in contravention of the then Trade Practices Act 1974 (TPA) by its use of two-price advertising in catalogues and a flyer.  Justice Lander made declarations in relation to the conduct and imposed a pecuniary penalty of $250,000.  He also ordered Zamel’s to implement a trade practices compliance program, publish corrective notices, and pay the ACCC’s costs.

On November 2013, the Full Court of the Federal Court upheld Justice Lander’s judgement, dismissing the appeal and ordering Zamel’s to pay the ACCC’s costs.

Zamel’s made a number of arguments on appeal, all of which were rejected by the Full Court:

  • That the Sale or “Now” price was represented to be no more than an offer price.  The Full Court rejected this argument on the basis that the Sale or “Now” price was not only an offer price but the price at which a customer who was not aware of Zamel’s aggressive discounting policy would consider he or she could purchase the item during the sale period.
  • That the Strike Through or “Was” price was also represented to be no more than an offer price, and that the Court would need evidence of consumer reactions before it could conclude that it was anything more.  The Full Court rejected this contention, considering the history of various judgments in the Prouds Jewellers and Ascot Four cases and concluding that although there were some issues in reconciling them entirely, the Full Court decision in Ascot Four on a similar point provides sufficient support for the trial judge’s approach.
  • That the trial judge erred in finding the Savings Representation was misleading or deceptive (or likely to mislead or deceive) and that it was a false or misleading representation with respect to the price of goods.  This proposition was put on two bases:
    • The first was that the ACCC adopted a four month pre-sales period rather than 12 months, and did not include any sales after the sales period.  The trial judge found that this period was long enough to obtain an understanding of the sales history of the item, with which the Full Court agreed.  There was nothing put to the Full Court to suggest that the lack of post-sale sales data was likely to have a material bearing on the analysis.
    • The second was that there was insufficient evidence to find that the represented counterfactual (the “Was” price) was false, on the basis that only 6% of sales on average were at the Strike Through or “Was” price (or within 10% of that price) and this would represent the proportion of customers who were not aware of Zamel’s aggressive discounting policy.  However the trial judge concluded that even if 5-10% were “unaware”, this meant the size of people to whom the savings representations were made was 150,000-300,000 given the size and expenditure involved in the advertising campaign, and he considered the class to be larger.
  • That the trial judge’s approach was erroneous because it would mean that a trader could not engage in was/now price advertising where it had difficulty selling goods over a reasonable period and reduced their price in order to sell them.  The Full Court rejected this, noting that if there were no sales of the good over an appropriate period it is difficult to see how the represented counterfactual would be shown to be false.  On the other hand, as was the case with Zamel’s, falsity might be shown if there was such a practice of aggressive discounting that it could be inferred that the hypothetical sale would not have been at the Strike Through or “Was” price.

The judgment provides further guidance to retailers on the importance of accurate pricing representations in the lead up to the Christmas shopping frenzy.