Keeping it real when pricing goods for sale

The Commerce Commission is reminding retailers about their obligations under the Fair Trading Act to make sure that bargains offered to shoppers provide real savings, ahead of this year’s Black Friday and Christmas season sales.

Commission Chair Anna Rawlings said, “price promotions are common at this time of year, and we are reminding retailers to take care that the discounts they offer provide genuine savings off the usual selling price. In addition, prices should not be increased before a sale to immediately claim a bigger discount at sale time”.

“A ‘sale’ should provide a limited opportunity to buy at a genuinely reduced price and should not continue for prolonged periods of time offering the same price. Fine print should not be used to hide important information or change the meaning of a headline offer.”

Retailers are required to make accurate representations about the availability of goods and delivery timeframes and they should be able to back these up – including promises that goods will be delivered within a certain timeframe such as “within 10 working days” or “before Christmas”.

“Retailers should also have good processes to monitor stock levels and update their website so they don’t mislead consumers by advertising and selling items online that are no longer available."

If a retailer sells something they can no longer provide, they may need to refund to the consumer the total cost of the product within a reasonable timeframe.

Delivery services are experiencing increased demand as a consequence of the time of year and changing COVID-19 alert levels. This is impacting on delivery times. Retailers should monitor their provider’s delivery performance and adjust the promises they make to their customers about delivery timeframes accordingly.

The reminder comes as part of the Commission’s annual reminder to retailers and consumers.

Tips for retailers include:

• Don’t use fine print to hide important information.
• Ensure discounts are taken off the usual selling price rather than any original price.
• Price comparisons must involve ‘like-for-like' products or services.
• A sale is a brief limited opportunity to buy goods at reduced prices.
• ‘Clearance’ sales can only be used for clearing goods. Products on clearance should not return to full price.
• ‘Special offer’ or ‘special’ means something unusual.
• Make sure shelf prices, or prices advertised, match checkout prices.
• Do not exaggerate savings to be made or the range of goods available at a discounted price – if you can’t back it up, don’t say it.

Background

Part of the Commission’s role is to make sure that businesses understand their obligations under the Fair Trading Act when they are pricing and advertising goods on sale.

Resources to help businesses understand their responsibilities under the Fair Trading Act in relation to pricing include videos and real life examples of pricing practices that breach the Fair Trading Act. The Commission also has a range of fact sheets on fine print, unsubstantiated representations, bait advertising, and buying and selling online.

Businesses are urged to seek legal advice if they have any concerns about how to comply with the law.

Pricing is consistently one of the most complained about areas, amounting to more than 15% of Fair Trading complaints the Commission receives each year. High prices and price increases are not illegal under the Fair Trading Act because businesses are free to set their own prices. However, if a business gives a reason for the increase, then that reason must be true. This is because the Fair Trading Act prohibits misleading and deceptive conduct, and false representations.

Recent cases

• Earlier this year, the Commission filed charges against Strandbags alleging its representations about significantly discounted or special prices were liable to mislead the public.
• In 2020, Noel Leeming was warned for making delivery representations without reasonable grounds during the COVID-19 lockdown.
• In 2020, PAK’nSAVE Mangere was fined $78,000 for discrepancies between the promotional price displayed or advertised and the price charged at the till after pleading guilty to six charges of making false and/or misleading representations about price.
• In 2017, Bike Barn was fined $800,000 after pleading guilty to charges under the Fair Trading Act. Bike Barn had attracted customers by creating misleading impressions about the discounts available on bicycles and the duration of the discounts. 

Consumer recently published the results of a survey of prices at several large retailers.

The Commission’s tips for consumers will be published separately.

Article provided by Commerce Commission New Zealand