With the constant pressures of deadlines, supply orders, reporting, accounting requirements and profit margins (just to name a few), businesses can inadvertently fall foul of provisions of the Australian Consumer Law (ACL).
Businesses often underestimate the consequences of breaching the ACL and fail to seek legal advice before it is too late.
One area of particular importance is pricing. Below are 3 common pricing pitfalls of which businesses should be aware.
Multiple pricing occurs when a particular product or service is advertised for sale at 2 or more different prices. While this may not seem like a common occurrence, this issue can often rear its head as a result of typos, clerical mistakes or communication break-downs between staff.
In such circumstances, a business is obliged under section 47(1) of the ACL to sell the product for the lower of the 2 prices until the mistake is rectified. Section 47(5) of the ACL contains strict provisions concerning the manner in which a pricing mistake can be rectified. Generally, a correction must be notified to customers by the same or similar method by which the price was originally advertised.
Given the significant loss a business potentially stands to lose as a result of this mistake, advice should be sought before any further actions are undertaken.
Businesses are always looking for new ways to build their customer base and for many, pricing is the first tool they turn to.
Bait advertising is the practice of advertising goods or services at discounted prices to attract customers. While this practice in and of itself is not prohibited, businesses should be aware of its associated risks.
Section 35 of the ACL prohibits a business advertising goods or services at a discounted price when such goods or services are not expected to be made available in reasonable quantities and for a reasonable period of time1. Many of the provisions in the ACL are specifically designed to prevent suppliers from engaging in conduct that would in all likelihood mislead or deceive consumers. Bait advertising is considered such deception.
Therefore, businesses should always exercise caution when offering discounted prices to customers in order to avoid breaching the ACL and potentially incurring significant pecuniary penalties.
In addition to the many specific prohibitions contained in the ACL, businesses must ensure that none of their pricing techniques are designed to mislead consumers.
A detailed analysis of what constitutes misleading behaviour will be published in a separate wespokelaw article. In the meantime, it is useful to be aware of some common misleading pricing practices:
Although none of the above examples are necessarily misleading, they can often result in breaches of the ACL when used without due consideration of the associated legal requirements.
Operating a business is never easy and ensuring that your business is complying with every single law can be extremely draining. Nevertheless, it can take just one disgruntled customer to contact the Australian Competition & Consumer Commission for everything to turn sour and your business to be put under the microscope. Ignoring the ACL is not worth the risk.
Posted on: 4 July 2016