Everyone loves a discount but beware of was/now pricing – Australian regulator on the attack

The Australian Competition and Consumer Commission (ACCC) has issued four furniture retailers with infringement notices following an investigation into their use of discount price representations in advertising. Plush Sofas, Koala Living, Early Settler and Oz Design each paid $12,600 after the ACCC alleged that each had used was/now pricing or advertised savings that were not genuine savings for customers.

In one case, an occasional chair was advertised as "$799, save $200" when its usual price for the previous six months was actually $100 cheaper than the sale price. In another, an ottoman was advertised at '$539, save $360' but it was for sale for $449 directly before the sale.

These infringement notices follow the Federal Court proceedings brought by the ACCC against online retailer Kogan following its advertisement of a 10% saving on products at its end of financial year sale in 2018. It is alleged that Kogan inflated prices on more than 600 products immediately before the promotion, some by more than 10%. This matter is before the courts, with the next hearing scheduled for March 2020.

What is an infringement notice?

An infringement notice is issued by the ACCC if it reasonably believes that a breach of certain provisions of the Australian Consumer Law (ACL) has occurred. The alleged breaches that can attract an infringement notice include the ACL provisions in relation to:

  • unconscionable conduct;
  • false or misleading conduct;
  • pyramid selling;
  • specific product safety and product information provisions; and
  • providing false or misleading information, or failing to respond, to a substantiation notice.
The penalty amount in an infringement notice is $12,600 for a corporation, $126,000 for a listed corporation, or $2,520 for an individual per contravention, except for those breaches in relation to substantiation notices which attract smaller penalties.

Generally, an infringement notice will follow initial contact from a representative of the ACCC, who will set out the concerns in relation to breaches of the ACCC and seek information or documents in relation to specified conduct. The recipient of this request will be in a position to respond, whether by providing information or documents as relevant. It is strongly recommended that any disclosures to the ACCC be done in consultation with a lawyer. The ACCC will then determine whether an infringement notice is reasonable and appropriate.

It is important to note that the issuing of an infringement notice by the ACCC is not a finding of contravention. There is no legal obligation on a recipient to pay a fine or otherwise comply with an infringement notice. It is often a balancing act in determining whether it is appropriate to comply. Recipients should take into account the fact that the payment of an infringement notice does not mean that the recipient has admitted that they have breached the ACL or that they are convicted of an offence. The amount of an infringement notice is less than the maximum penalties should the ACCC commence proceedings, which can be up to the higher of $10,000,000, three times the value of the benefit received, or 10% of annual company turnover per contravention, as well as the potential exposure to other litigation costs. The payment of an infringement notice means that ACCC cannot commence court proceedings in relation to the alleged conduct (so there is no 'double dipping'). However, other parties who have a cause of action can still bring proceedings (for example, customers). There is also negative publicity that will flow from the payment of an infringement notice as the ACCC will publicise the fact an infringement notice has been paid, and it is published on a public register.

There are also avenues available to the recipient of a notice to seek to have the infringement notice withdrawn. The recipient of the notice may consider that they did not engage in the conduct alleged, or have further information to provide to the ACCC. As an infringement notice has payment terms of 28 days, it is recommended that recipients act promptly to provide a written request to withdraw the infringement notice, or seek an extension to respond.

If a company or person who has received an infringement notice has a genuine basis to challenge the allegations of contravention, then it may choose not to comply with the infringement notice and defend its position should the ACCC commence litigation. It is recommended that legal advice be obtained if this approach is proposed to be taken.

Discount Pricing still has a place in Australian Advertising

Discount pricing such as “Sale,” “Reduced Price,” “50% Off,” “Save $75,” “Save $75, Was $200” are commonly used and effective marketing tools for retailers. The ACCC's attention should not be seen as a barrier to using such advertising techniques. However, these penalties should act as a reminder to retailers to ensure that this messaging is accurate and not misleading.

Care should be taken to ensure the 'was' price was available to consumers for a reasonable time before the sale period, and therefore the claim of saving can be substantiated. Particular caution should be taken by retailers who commonly discount products, as establishing and substantiating the 'before' price can be difficult as regular or lengthy discounting can result in the discounted price becoming the regular price. Given that the accuracy of each pricing representation will be on a case by case basis, substantiation materials including pricing information should be retained in order to prove a saving is genuine if challenged. 

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