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Have you been deceived by comparison advertising?

Legal advice on changing business structure

On 16 September 2016, the Australian Competition & Consumer Commission (ACCC) announced that London-based online clothing retailer Charles Tyrwhitt LLP had paid a penalty of $10,800 after being issued with an infringement notice by the ACCC.

You might recognise Charles Tyrwhitt from their various advertisements and marketing material in flyers, magazines and on your Facebook news feed. The company markets itself in Australia as a manufacturer and retailer of high quality shirts, at discounted prices.

The ACCC’s investigation, and infringement notice, focused on Charles Tyrwhitt’s practice of using two-price comparison advertising. Two-price comparison advertising typically involves promoting an item with a previous ‘was’ price and a current ‘now’ price which indicates savings to the customer.

While two-price comparison advertising is common practice amongst retailers, there is a fine line between when such pricing strategies are lawful and when that strategy becomes misleading or deceptive conduct, in breach of sections 18 and/or 29 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).

In Charles Tyrwhitt’s case, the ACCC found that the company’s advertisement of its men’s ‘’slim fit, non-iron, micro-spot white” shirt with a ‘was’ price of $160 and a ‘now’ price of $69 was misleading and deceptive.

The ACCC’s reasoning for this finding was that:

  • the shirt had not been genuinely offered for sale at the ‘was’ price for a reasonable amount of time;
  • the shirt had only been advertised for sale at the ‘was’ price in a hard to locate region of the company’s website; and
  • no customer had ever purchased the shirt at the ‘was’ price.

 

As such, it was found to be misleading for the company to represent that customers would receive certain savings when the product was not sold at the pre-discounted price.

The ACCC’s findings are consistent with past cases in relation to two-price comparison advertising.

In 2013, the Federal Court dismissed an appeal by a jewellery retailer in substantially the same position as Charles Tyrwhitt[1]. The jewellery retailer was found to have engaged in misleading and deceptive conduct pursuant to the relevant provisions in the Trade Practices Act 1974 (Cth), the predecessors of sections 18 and 29 of the Competition and Consumer Act 2010 (Cth).

In that case the Court indicated that to use two-price comparison advertising, the ‘was’ price must:

  • be determined by assessing the recent sales and pricing history of the product; and
  • be the price that an ‘ordinary or reasonable’ consumer would be willing to pay for the product in the period immediately before implementing such advertising strategy.

 

However the Court also found that two-price comparison advertising may still be valid, despite no recent sales at that price, if the company is able to show that an ‘ordinary or reasonable’ consumer would have been willing to pay that price for the product.

If you have any questions or concerns in relation to your marketing or advertising practices, or in relation to your business or commercial matters, please contact Bobby Wan by email on bobby.wan@chamberlains.com.au or call our office on (02) 6215 9100.

[1] The Jewellery Group Pty Ltd v Australian Competition & Consumer Commission [2013] FCAFC 144

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