On 18 January 2013, the Federal Court imposed a $250,000 fine on The Jewellery Group Pty Ltd for misleading and deceptive conduct and false and misleading representations made with respect to the price of goods or services. Recently, the ACCC has been proactive in instituting these types of proceedings and in some instances obtained penalties of up to $3.61m.

The cases shed light on the approach of the ACCC and the courts, and the consequences for businesses should they engage in conduct or make representations regarding price which are deemed to mislead the public. It is important that businesses are aware of their obligations in relation to pricing laws, and not make misleading representations to consumers in relation to prices for goods and services they supply.

Pricing Actions: Two broad types

In taking actions against companies in relation to prices, the ACCC has referred to two separate parts of the Australian Consumer Law (ACL).

The ACCC has referred to the ACL provisions prohibiting misleading or deceptive conduct (section 18) and false and misleading representations (section 29). Conduct capable of being misleading in relation to price may be where:

  • ‡ ‡a price is displayed for a product which does not show the full amount chargeable, for example omitting an additional mandatory fee, or
  • the representation as to price is made to a reasonable person of the class to which the conduct was directed, and the representation is in fact false or would mislead that person.

The ACCC has also taken action for breaches of sections 47 and 48 of the ACL, which prohibit multiple pricing and component pricing. The sections are aimed at regulating the sale of goods, and goods and services in the case of section 48.

Section 47 provides that a person must not supply goods if:

  1. the goods have more than one displayed price, and
  2. the supply takes place for a price that is not the lower, or lowest, of the displayed prices.

The displayed price will include where the price is: annexed to, written, printed, stamped or located on the goods or anything used in connection with the good; displayed on anything on which the goods are mounted for display; published in a catalogue which is still current; or is in any other way represented so that consumers could reasonably infer that the price is applicable to the goods. It does not include where a price is displayed in a currency other than Australian or where the markings on the goods are not considered the price or are a manifest typographical error.

Section 47 does allow for businesses to have multiple pricing for the same goods available in different locations/regions but only where it is made explicitly clear in the relevant promotional material that the varied price applies to a specific location or region only.

Section 48 prohibits component or partial pricing of goods and services. A person is prohibited from making a representation about the price of goods or services if the represented price only constitutes part of the total price of the goods or services, unless the total price is also displayed as a single figure and in a prominent way. For example, a company may breach the section where it displays the price of a consumer good, but lists the cost of GST or a surcharge separately and does not include this in the most eye-catching or prominent figure displayed (See for example, ACCC v Le Sands Restaurant,and Le Sands Café Pty Ltd t/as Signature Brasserie (2011) ATPR 42-342).

A representation can be a verbal or written statement, and can include a promotional tool or publication, such as a company brochure. The single price is the total amount of costs payable for the good or service at the time the representation is made. It includes amounts such as taxes, levies, duties, fees, and any charge payable to the representor (for example, set-up costs).

Certain exemptions apply, such as where the relevant charge is optional, or where the charge is for transport of the goods from supplier to purchaser. However, if the supplier is aware of the minimum amount to be paid for sending the goods, this must be specified. A representation made in relation to a contract for periodic payments does not have to display the single price for the contract as prominently as the component prices.

Pecuniary penalties for breaches of sections 47 and 48 may be imposed. This could be a maximum civil and criminal penalty of $1.1m for a body corporate and $220,000 for an individual with respect to section 48.

Cases involving pricing misrepresentations

ACCC v Jewellery Group Pty Ltd (No 2) [2013] FCA 14

In August 2012, Justice Lander of the Federal Court found that Jewellery Group Pty Ltd (Zamel’s) had misrepresented the savings that consumers would benefit from in purchasing items during sale periods. Zamel’s made statements in six catalogues and a flyer, which were provided in store, on its website and via letter box drop between November 2008 and May 2010, with regard to 44 different jewellery items. The letterbox drop involved the distribution of approximately 3 million copies of the catalogue.

In essence, Zamel’s advertisements displayed a sale price next to a ‘strike through’ price, or text stating ‘Was X’ ‘Now X’. The Court found that Zamel’s had not sold or had rarely sold the items at the higher price displayed in the 4 months prior to the start of the sale. This meant that consumers would not in fact ‘save’ the difference between the displayed prices. This was intended, the Court found, to induce consumers to purchase the items during the sale periods. The Court found that the statements amounted to misleading and deceptive conduct and false and misleading representations as to price.

On 18 January 2013, Justice Lander imposed a civil penalty on Zamel’s of $250,000 which His Honour said reflected the seriousness of the conduct and the need to deter other retailers from engaging in similar conduct. The Court also ordered Zamel’s to publish corrective notices in newspapers and on its website, as well as implement a trade practices compliance programme. Further, they were ordered to pay the ACCC’s costs. An appeal has been filed.

TPG Internet Pty Ltd v ACCC [2012] FCAFC 190

The ACCC took action against TPG in relation to advertisements regarding internet services. TPG had revised its initial set of adverts after complaint was made by the ACCC. There were to two sets of advertisements which included TV, newspaper, radio and online.

The advertisements featured a headline price of $29.99 per month for unlimited ADSL2+ broadband service. In fact, the consumer was required to also purchase home phone line rental from TPG, taking the total monthly cost to $59.99. There were also up front charges payable at the start of the contract and customers were required to contract for a minimum of 6 months. This additional information was not included as prominently as the headline, nor did the advertisements display a prominent single price for the plan displayed. The second set of advertisements had made the additional charges more obvious than the first set.

The matter proceeded before Justice Murphy of the Federal Court, who found that there had been breaches of the misleading or deceptive conduct provisions in that TPG conveyed to the relevant class of consumers that they could purchase the product without additional charges to the $29.99 which appeared in the headline. His Honour also found that there had been breaches of the false and misleading statements and single pricing provisions.

On appeal, the Full Court on 20 December 2012 upheld Justice Murphy’s orders generally (including the order that the TPG implement a trade practice compliance programme). However, the Full Court found that when considering all TPG’s advertisements in their full context, they were not misleading. The Full Court intimated that it considered an overall penalty of $500,000 to be appropriate in substitution of the order to pay a penalty of $2m originally imposed by Justice Murphy.

The ACCC is appealing to the High Court in relation to the Full Court determination that the advertisements were not misleading and further on the issue of penalty.

Other recent cases

On 14 December 2012 in ACCC v Air Asia Berhad the Federal Court imposed a penalty of $200,000 against the company for breaching section 48 of the ACL.

Between March 2011 and January 2012 the company did not display on its website some airfare prices inclusive of all taxes, duties fees and other charges in a prominent way and as a single figure. In his reasons, Justice Tracey commented that not only do such actions attract customers to a transaction which, but for the misleading price, they would not have otherwise entered into, but a company engaging in such practices will also gain an advantage over other competitors who do the right thing.

In July 2011, the Federal Court found that Optus breached the ACL in relation to campaigns launched by Optus in 2010.

The relevant conduct was television, newspaper, billboard and direct marketing advertisements made by Optus. The representations were that that for a monthly payment, a consumer would receive a headline data allowance of broadband, which was split into peak and off peak data allowances. There was a disclaimer in smaller and less prominent print noting that “Speed limited once peak data exceeded”. This meant that, in effect, once the peak data was exceeded, the speed of the service was lowered to 64kbps, regardless of the amount of off peak quota remaining. Justice Perram held that the advertisements were misleading or deceptive in nature and ordered pecuniary penalties, restraining orders and corrective orders against Optus.

Optus appealed the decision to impose pecuniary penalties and the Full Court of the Federal Court handed down its decision in March 2012, imposing a penalty of $3.61m.

New proceedings

The ACCC has also commenced proceedings against Abel Rent A Car, a business operating in Brisbane. It alleges that online and in print advertising, the company misrepresented the true cost of hiring vehicles in that it did not include in the displayed price additional fees for administration and a ‘vehicle recovery fee’. The ACCC has alleged breaches of misleading or deceptive and false or misleading representations sections of the ACL, and the matter is set down for the first hearing in March 2013.

Infringement Notices

In 2012, Foxtel paid seven infringement notices issued by the ACCC totalling $46,200 for false and misleading advertisements during the 2011 Christmas period. The advertisements included a prominent headline that a subscription could be acquired for $55 per month on a six-month contract. In fact, the fine print locked customers into a 12 month contract with a price increase to $77 per month for the second 6 months.

Implications for retailers and companies

These cases highlight that:

  • ‡ ‡the ACCC will prosecute cases involving pricing representations using combinations of provisions relating to misleading or deceptive conduct, false or misleading representations and/or pricing
  • ‡ ‡the ACCC has targeted misleading pricing representations in the period 2011 to present
  • ‡ ‡the Courts may be willing to attribute to the reasonable person in the class knowledge of the types of offers which are generally made about a particular product
  • ‡ ‡the assessment of whether a pricing representation breaches the misleading or deceptive conduct and false and misleading representation provisions will turn heavily on the facts and individual circumstances surrounding any particular advertisement
  • ‡ ‡contraventions of pricing provisions (sections 47 and 48) can be established regardless of whether the contravention in question was intentional conduct or caused by error
  • ‡ ‡the Courts may view a series of contraventions as arising from one act or error, correspondingly reducing the number of penalty orders it may apply
  • ‡ ‡it is unclear whether an inadvertent breach of the relevant sections will act as a mitigating factor in relation to the penalty imposed.

Having regard to the decisions, businesses should take care that they consistently display a single price for goods and services, and not misrepresent the price or any discounts potentially afforded to a consumer. The ACCC will not hesitate to issue infringement notices for breaches and institute proceedings for more serious breaches. To this end businesses should:

  • ‡ ‡check, and obtain advice regarding, advertising and marketing campaigns and ensure that any advertising material is clear, accurate and complies with the ACL (this includes TV, radio, internet advertising, websites, catalogues and in-store signage).
  • ‡ ‡not rely on external advertising agencies, designers or copywriters that the product they have provided to the business complies with the ACL.
  • ‡train staff appropriately in relation to consumer rights, including misleading or deceptive conduct, false representations and pricing issues (this includes having staff manuals)
  • ‡ ‡ensure that they have a trade practices compliance programme in place for both training, the reporting of incidences and dealings with regulators including the ACCC.