Strike out on savings claims

On 16 August this year, the Federal Court held that the company which operates the Zamels chain of jewellery stores in Australia misled consumers about the savings they could make during Zamels’ sales, contravening section 52 and 53(e) of the former Trade Practices Act (as the conduct occurred before 1 January 2011 – these provisions are now sections 18 and 29(i) of the ACL). The misleading conduct was contained in catalogues, flyers, in-store and on Zamels’ website.

Zamels created advertising which showed the ’original’ price for goods struck though (for example “$99 $45”) or which included ‘Was’ and ‘Now’ prices. This is sometimes referred to as ‘dual pricing’. The Court found that Zamels had either not sold the goods at the struck through or ‘Was’ prices or had rarely sold them at these prices (they were rarely sold at these prices primarily because of Zamels’ ‘vigorous’ discounting policy). To reach this conclusion, the Court looked at sales data from a period of 4 months prior to the date when the Zamels sale commenced.

Zamels attempted to defend its advertising on the basis that the ‘Was’ price was merely an offer price, not a sale price. This was rejected by the Federal Court. The Court held that the ”representation in the brochure is that the customer would have paid the strike through price or was price before the sale period started. The unaware customer cannot think that the strike through price, or was price, was an offer price that was subject to negotiation”. Justice Lander described the catalogue and flyer as intended to induce, attract and encourage consumers to purchase the items during the catalogue sales.

The ACCC’s Chairman, Rod Sims, commented on the Federal Court’s decision, saying that “[t]he court’s decision today has extended this area of the law for the benefit of consumers by making it clear that retailers must not represent savings to be made by consumers during sale periods by the use of two price advertising when they have not sold, or rarely sold, items at the higher price”. Further comments by the ACCC on this case are available here.

The Court is yet to hear submissions on relief sought by the ACCC, but the ACCC has indicated that it will be seeking penalties, a declaration, corrective advertising, compliance training and costs from Zamels.

The former operator of the Zamel’s business was also subject to a criminal prosecution where there had been no sales of items at the higher price in the period before the catalogue sale.

This case serves as a warning to retailers to ensure that all dual pricing advertising can be substantiated and goods or services were supplied for a reasonable period of time at the ’was’ price to justify a ’save’ or ’now’ claim.