Timely pricing reminder

As the retail market tightens and franchisees chase the consumer dollar more aggressively at store level two recent cases provide a timely reminder of the importance of ensuring that all advertisements and marketing initiatives comply with the Trade Practices Act.

In ACCC v Carrerabenz Diamond Industries Pty Ltd, Carrerabenz was involved in the business of buying and selling diamonds. The ACCC commenced proceedings against Carrerabenz claiming that six advertisements placed in newspapers made false or misleading representations in connection with the supply or possible supply of goods, therefore breaching section 75AZC of the TPA. The advertisements each specified a "usual mark price" and a "crazy price" in respect of each item of jewellery. However, the advertisements were said to be misleading because, in each instance, each item of jewellery had not been offered for sale to the general public at the "usual mark price." As a consequence of this breach of section 75AZC of the TPA, Carrerabenz was fined $250,000.

In 2008, South Australian wine producer, Moving Juice Pty Ltd advertised wine on its website using "was" versus "now" price comparisons. However, Moving Juice had not offered the advertised wines at the "was" price for over 6 months. In this instance, the ACCC was concerned that the advertising had misled and deceived customers in contravention of sections 52 and 53(e) of the TPA. Moving Juice has now given the ACCC court enforceable undertakings that it will not, among other things, use "advertising or other promotions that contain false, misleading or deceptive representations with respect to the price of published goods."

These cases reinforce the importance of complying with the TPA, and having an effective compliance program that covers not only franchisor staff but franchisees. There are substantial penalties for breach of the TPA, including fines and orders to undertake corrective advertising. It is not uncommon for the ACCC to seek to join the franchisor even if the infringement is by a franchisee.

By Allison McLeod - Deacons Lawyers

Deacons Lawyers offer franchise advisory services to franchisees and franchisors