Incorrect pricing can prove costly!
Morley Cycles
A recent case on point is Morley Cycles, a Western Australian bicycle retailer. An investigation by the ACCC found that in an eight page catalogue that advertised ‘was’ prices and ‘now’ prices for many bicycles, at no time had the bicycles been sold at the higher ‘was’ price. The ACCC took the view that this was a contravention of the Trade Practices Act 1974 (TPA) because it misled consumers.
In addition to negative publicity, it also proved extremely costly to Morley Cycles. Despite acknowledging the errors with its advertising campaign, the ACCC required Morley Cycles to implement a Trade Practices law compliance training programme and provide court enforceable undertakings about future ‘was/now’ advertising. Of further concern for franchisors, Morley Cycles was also required to pay for and provide corrective notices to all households where the catalogue containing the incorrect pricing had been sent.
JB Hi-Fi
In a similar case, JB Hi-Fi was also investigated by the ACCC about one of its advertising catalogues. The catalogue contained many products where a discount was said to be a saving of a particular dollar amount off that products recommended retail price. The ACCC was concerned that if each of the products had not been sold in reasonable quantities, for a reasonable time at the recommended retail price, then the catalogue may have contained false or misleading information.
JB Hi-Fi maintained that their advertising catalogues were accurate but agreed on a ‘without admission’ basis not to advertise any future product with a specified discount amount, unless the product had been sold in that market in reasonable quantities, for a reasonable period of time and within a reasonable time period prior to the advertising campaign.
Lessons for Franchisors
Franchisors should ensure that all advertising claims about price, discounts or savings are accurate and can be supported by previous sales data for the market where the advertising campaign is run. Inflating prices to make savings or discount claims more enticing will breach the TPA, and will invite the ACCC to take action, which may have devastating consequences for a systems reputation. Corrective advertising is not only costly but highlights to consumers the alleged wrongdoing.
Franchisors need to educate their Thomson Playford Cutlers works with franchisors as a strategic partner to improve overall network performance. We manage compliance issues and address the legal considerations that contribute to franchise network efficiency, profitability and expansion.
18.02.2008
FCA Member
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