25/06/2009

"THIS AMAZING PRODUCT WAS $199 NOW ONLY $99! SAVE $100" We see these kinds of ads everywhere. It's called 'was/now' pricing and lately there has been new case law in determining when such pricing is held to be misleading.

Was/now pricing is a very popular advertising technique among retailers because consumers are alerted of how much they will save by purchasing the product during the sale period.  But next time you are thinking of using was/now pricing during a sale period, perhaps you should think twice about whether the “was” price was the price offered for sale or whether the product had actually been sold at the “was” price.

In ACCC v Prouds Jewellers Pty Ltd [2008] FCAFC 199 (“Prouds”) it was held that it did not matter whether the product was actually sold at the “was” price as long as it was offered at the “was” price.  However, this meant that no matter how overpriced a certain product was, as long as it was offered at that price and a consumer would have paid the “was” price had it purchased the goods outside of the sales period, it was permissible to use the “was” price in was/now discount advertising. 

Lately, there has been a very similar case (Ascot Four Pty Ltd v ACCC [2009] FCAFC 61) (“Ascot”) which significantly changed the previous position in Prouds. 

Ascot advertised certain items in a Christmas sale catalogue using was/now pricing.  The ACCC alleged that the advertisement was misleading because none of the jewellery had been sold at the “was” price before the Christmas sale.  The trial judge found that the representation was misleading as there was no actual saving by purchasing the jewellery during the sale period because it was never sold at the higher price. 

Ascot then appealed to the Full Court relying on Prouds.  The Full Court upheld the decision of the trial judge explaining the difference between Prouds and Ascot.  In Prouds, which was a case involving similar facts, the difference between the “was” price and the “now” price did represent the saving that consumer would have made therefore, it was not misleading.  However, in Ascot, there had been no sales of jewellery anywhere near the “was” price before the sale.  The difference between the “was” price and “now” price did not represent the saving and therefore it was held to be misleading.

The message is that retailers should be careful when using was/now pricing.  It is important to bear in mind that a “was” price must be the price that would have been paid before the sale and is not just the price that was initially offered to customers.  To be safe, it is probably wise to ensure you retain records of sale at the “was” price, otherwise you could be breaching the Trade Practices Act. 

If are concerned about whether your was/now pricing is offending the TPA and/or if you think you have a claim against a retailer on the grounds of misleading was/now pricing, please contact TOWNSENDS BUSINESS AND CORPORATE LAWYERS on (02) 8962 6222.