Updated ACCC guidance regarding two-price advertising
The ACCC has just updated its website guidance regarding two-price advertising. This sales technique involves making statements such as:
- was $X, now $Y
- $X, now $Y (strike through pricing)
- $X off
- X% off
If you use two-price advertising you need to be careful how you do this to ensure that you are not breaking the law.
The recent judgement handed down by the Federal Court in the Zamel’s case does not affect businesses current obligations as it is subject to appeal. The ACCC will update its guidance accordingly when the results of this case are available.
The updated guidance is available on the ACCC website and a version is also pasted below, for ease of reference.
Two-price comparison advertising
Price comparisons that contrast a higher previous price to a lower current or sale price will breach the Australian Consumer Law (ACL) if any represented savings are not real.
Businesses often make comparisons between product prices being charged or promoted as part of a sale and:
- the company’s own previous pricing (including by ‘was/now’ or ‘strike-through’ pricing or by specifying a particular dollar amount or percentage saving)
- the ‘cost’ or wholesale price
- a competitor’s price
- the recommended retail price (RRP).
Statements such as ‘Was $150/Now $100’ or ‘$150 Now $100’ are likely to be misleading if the specified, ‘Was’ or ‘strike-through’ prices are inflated beyond what those goods would have been purchased for during a reasonable period immediately before the commencement of the sale.
How long this reasonable period is may depend on factors such as:
- the type of product or market involved and
- the usual frequency of price changes.
Similar considerations apply to the specification of dollar amount or percentage savings.
Comparisons between ‘cost’ and ‘sale’ prices can be misleading if the specified ‘cost’ price is greater than what the business paid for the goods. Consumers may be more likely to purchase goods if the gap between the wholesale and retail price is perceived to be smaller than what it actually is.
Conduct may also be misleading where, for example, price comparisons are made with a competitor’s price for identical goods, but the stated price is taken from a different market or geographical location.
Advertisements or promotions of ‘savings’ or ‘discounts’ in comparison to the RRP of goods and services may convey to potential customers they are getting a good deal because the prices are less than the RRP. If the product has never been previously sold at the RRP, or the RRP does not reflect a current market price, then advertisements using this form of comparison may, depending on the circumstances, misrepresent the amount of savings.
Tips for displaying two-price advertising
It is good business practice and fair trading risk management to keep records substantiating any two-price claim.
It is also important to remember that a ‘sale’ or ‘discounted’ price should only be available for a limited period. This is because if a reasonable amount of time has elapsed and an item is still ‘on sale’, the discounted price effectively becomes the new selling price, so it may be misleading or deceptive to continue to call it a ‘discount’ or ‘sale’ price.