As expected, COVID-19 has driven innovation in business.
With some retailers ceasing physical trade, and less customers visiting stores in person, businesses are looking at new ways of selling (e.g. online) or implementing new marketing strategies to maximise sales (e.g. price lures and other incentives).
With the length of the lockdown, customer preferences are likely to have changed, so many of these alternate trading changes will be continued.
Crisis or no crisis, businesses need to remain compliant with the Australian Consumer Law (ACL), and the ACCC remains vigilant. We’ve set out some key issues to be aware of below.
The ACCC recently imposed a $12,600 penalty on a wholesaler who allegedly misled consumers about the running power of a portable generator. The advertised running power was 6 kW, but in reality, the generator could only achieve this running power for a short time. A representation needs to be fairly based in fact, and if there are important limitations (e.g. running time), these need to be clearly explained.
This type of behaviour can easily escalate, with retailers exaggerating the performance features of equipment and machinery to “one-up” competitors. It is important to refrain from getting in a “specification” war – when there is no basis to make claims. Just because one trader bends the truth does not mean others can do too.
The ACCC has always been vigilant in pursuing retailers for engaging in misleading or deceptive “was/now” price advertising. This has not changed. Earlier this year, 4WD Supacentre was required to pay $63,000 in penalties for allegedly misleading consumers about ‘was/now’ prices for goods on its website.
It is common practice for retailers to compare the previous price of a good/service to the current sale price. However, if a retailer makes a misleading or deceptive representation that a consumer has achieved a certain ‘saving’, this may result in significant penalties. Accordingly, businesses should be extremely cautious in making ‘was/now’ pricing representations, and regularly consider whether this is an appropriate marketing strategy.
There are guidelines around how long a product needs to be sold for, before a base price is established. Beware of the impact of special deals, other discounts, etc, when making any comparison. Differences between a floor price and an online price may also cause difficulties in making a fair comparison.
Resale price maintenance
The ACCC recently signalled its intention to revoke a resale price maintenance (RPM) notification lodged by power tool distributor Stanley Black & Decker (SBD).
While it is generally illegal for a supplier to set a minimum price for their products, a supplier can lodge a notification with the ACCC to obtain legal protection for this conduct. Nevertheless, a notification can be revoked if the ACCC determines that the likely detriment to the public will outweigh the likely benefit.
SBD wants to impose a minimum advertised price (online and in-print) for Dewalt power tools, accessories and attachments. The ACCC is concerned that this would not result in a net public benefit, as (amongst other reasons) consumers would be unable to ask retailers to match a competitor’s lower advertised price.
This shows that the ACCC is still cautious about the potential anti-competitive effects of RPM. Businesses should ensure that they are not engaging in such behaviour.
If you are concerned that your business may be contravening its obligations under the ACL, or want to know more about the representations/marketing claims your business can legally make, please get in touch.
– This article was prepared by law firm Macpherson Kelley and appeared on its website at www.mk.com.au