Advertising and pricing
General information on advertising
The main way to attract customers to a business is to advertise. Advertising can be very effective in reaching potential customers and showing them what businesses have to offer but unless it is properly targeted and effectively designed it can be a waste of money and give a business a bad name.
An important element of advertising is to be truthful. A well-informed consumer is a satisfied consumer and your best advertisement. Advertising is a business's public face.
Honest advertising involves:
- advertising all aspects of your product accurately;
- always stating the full price of a product;
- if having a sale or special, make sure the goods or services are available in reasonable quantities for a reasonable period eg. if supply is limited, say so - 'x amount or limited quantities only'.
Top of pageProhibition on misleading and deceptive conduct and false or deceptive advertising
Advertising can be a great source of information but it can also be a ploy to mislead the unsuspecting. All consumers are protected from false and misleading advertising under the Commonwealth Trade Practices Act and NSW Fair Trading Act. This means that shoppers have the legal right to receive accurate information about the products they want to purchase without being tricked.
Conditions and warranties in consumer supply of goods
The Trade Practices Act and the Fair Trading Act stipulate specific conditions that are implied in a consumer agreement to supply goods.
The more important conditions implied are:
- goods must be of merchantable quality;
- goods must be fit for the purpose supplied;
- goods must be as described or match the sample.
Merchantable quality means that the goods must be of reasonable quality considering their price and other relevant circumstances. If the goods have faults, this should be disclosed eg. they should be labelled as seconds or damaged stock.
Fit for the purpose supplied means that the goods must be reasonably suited for the purpose for which they were supplied. If a buyer has made a purpose known to the seller and relied on the sellers’ knowledge of the goods, then the goods must be suitable for that purpose. For example, if a buyer has indicated to the seller that he or she wants a juicer that juices hard vegetables as well as soft and the seller recommends a particular model, that model must juice hard vegetables.
Goods match the description or sample means that if the package displays a picture or describes the contents, then the contents must match the description or if you order from a sample, the goods must match the sample.
If the seller breaks any of these implied conditions and you have proof of purchase, you can usually return the goods and obtain a refund. If the seller refuses to accept the return of the goods, seek help from your nearest Fair Trading Centre.
The most important shopping tip is to shop around! Have a good look and compare the quality and prices. It is likely that if you take your time and avoid impulse shopping, you will end up buying exactly what you want and need, at a price you can afford.
Things a retailer must not do
It is illegal for a trader to:
- mislead or deceive the customer;
- make false or misleading claims about goods or services;
- pass off used goods as new;
- advertise products with false endorsements;
- claim any other benefits the products simply do not have.
The Fair Trading Act also requires traders who publish an advertisement of goods to ensure that sufficient stock is available to meet reasonable market demands.
When a sale is not really a sale
When products are advertised as reduced, the discount must be genuine. Find out what the original selling price of the item was before the sale to confirm that the sale is for real. Be wary of 'liquidation', 'end of lease' and 'sell out' sales as they are sometimes ploys to dispose of inferior goods brought in for the purpose of a quick turnover.
Example: Made up prices
A clothing retailer told its staff to write a 'made up' price on labels, cross that price out and then write the original price as the sale price. The retailer hoped that consumers would think that a price reduction had occurred and that savings were now available. The seeming price reduction was an illusion. This price advertisement was clearly misleading and in breach of the Fair Trading Act.
Bait and switch advertising
Another common form of false advertising is bait and switch. This is when a trader advertises a bargain price on an item to attract consumers into their shop. When they arrive, consumers find that the discounted item is sold out and instead the consumer is offered a different, more expensive item. When a trader advertises goods at discounted price, they must supply the goods at that price for a reasonable period of time. It is illegal to bait and switch and offenders can be prosecuted under the Fair Trading Act.
Of course, the store may well have run out of the item due to heavy demands. The period of the offer should be made clear in the advertisement. If it is only available for a limited period or stocks are limited, then that fact should be stated clearly in the advertisement. If consumers feel an advertised sale was a gimmick, ask to see the manager, and discuss the problem. If indeed the offer was genuine, the management may offer to get in the item wanted and charge the sale price - this is called a raincheck. Be aware that rainchecks are not compulsory under the Fair Trading Act.
Substantiation of claims
The Fair Trading Act gives the Office of Fair Trading the power to require persons who publish statements promoting the sale of goods, services or land, to substantiate their claims or representations.
Where a person publishes a statement advertising goods or services for supply at a specified price, those goods or services must be offered at the advertised price for a period and in quantities that are reasonable, having regard to the nature of the market.
Advertising part payments or instalments
If a trader advertises that a particular product or service is available, and included in that advertisement is an amount which represents an instalment or part payment (deposit), then the cash price must also be included in the advertisement.
If credit is offered and a reference is made to this in an advertisement, the advertisement need not contain an annual percentage rate, but must do so if the advertisement states the amount of any repayment. If the advertisement contains an annual percentage rate and fees and charges are payable, the advertisement must:
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state that fees and charges are payable; or
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specify the amount of the fees and charges payable; or
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specify the amount of some of the fees and charges payable and specify that other fees and charges are payable.
If an advertisement for fixed term credit contains an annual percentage rate it must also contain a comparison rate, which is a rate that includes the interest rate and the fees and charges related to a loan.
Further information on credit can be obtained at the Uniform Consumer Credit Code website.
Advertising gifts with purchase
Consumers should be wary of special gifts that are offered as an incentive to buy a product. Sometimes the cost of these gifts is built into the price of the original item. One example is travel agents offering cheap flights on package tour destinations, where the cost of the supposed cheap flight might be added to the all inclusive accommodation bill. There are many variations on this theme. Some are genuine, some have a catch. It is important to shop around and compare prices before making a decision.
The Fair Trading Act prohibits traders from offering gifts, prizes or other free items with the intention of not providing them.
Advertising business and job opportunities
Under the law, it is an offence to give false and misleading information on jobs or business ventures that operate from home, require work or require money to be invested.
The law aims to stop the fly-by-night operators who make a quick buck from arranging so-called 'business opportunities' with little care about the likely success of the ventures they are promoting.
A common example is the Envelope Stuffing Scam. Readers of an advertisement with the headline, 'Would you stuff 1000 envelopes for $1000', were offered a 'Complete Home Mailer Program' at a cost of $189. However, rather than receiving supplies of paper and envelopes, respondents were sent information on how to operate a mail order business similar to the one which had just duped them.
Another example is the Computer Software Swindle. People responding to an advertisement offering 'money making software', received a computer disk of business reports for $49.90. However, the promotion mainly consisted of information on how to copy and sell the disk to other users.
The Courts have ruled that what matters is whether a job or business opportunity advertisement will mislead the average person in the street. A breach of the law does not depend on whether the advertiser or promoter intends to mislead. Rather, it is whether they do mislead or are likely to mislead.
Also be aware that leaving out significant information can cause problems for a business. This is often a key feature of misleading job ads and is regarded as misleading by the Courts.
Advertising guidelines for business
Go to Advertising for business.
View a copy of the factsheet Advertising: Guidelines for business.
Advertising details required by licence holders
For details of the specific advertising requirements for licensed industries, link to the relevant PDF listed in the section below.
Advertising checklist
Download a copy of the factsheet Advertising checklist for the use of media staff in PDF format (size: 31k).
Advertising standards
The Advertising Standards Bureau made up of the Advertising Standards Board and the Advertising Claims Board is an industry funded self-regulatory system which provides a complaint resolution service. Decisions of both boards are guided by the 'Advertiser Code of Ethics'.
Consumers can lodge a complaint about an advertisement by writing to the:
Advertising Standards Bureau
Level 2, 97 Northbourne Avenue
Turner ACT 2612
Telephone: (02) 6262 9822
Fax: (02) 6262 9833
Website: www.advertisingstandardsbureau.com.au
Consumers can lodge a complaint by using the on-line complaint form on the Advertising Standards Bureau web site.
Dual pricing
A trader is not permitted to sell goods to which more than one price is attached unless the price charged is the lower or lowest price. "Attached" includes:
- a price annexed or affixed to, or printed, stamped or otherwise located on the goods;
- appears on a display or stand for the goods;
- is encoded on the goods;
- is published in any catalogue available for the public (unless the catalogue can reasonably be regarded as out of date); or
- in any other way represented as a price applicable to the goods.
If you pick up an item with two price tags attached, it is an offence for the trader to sell it at the higher price. However, if the trader does not want to sell it at the lower price, they have the right to withdraw it from sale altogether.
Code of practice for computerised checkout systems in supermarkets
Some supermarkets subscribe to a voluntary code, the Code of Practice for Computerised Checkout Systems in Supermarkets. These supermarkets display notices prominently at the store entry, advising customers that they are code participants. Providing the supermarket is a code participant, when an item is scanned at a price higher than that advertised or displayed on the shelf, a consumer is entitled to receive the first item free and all subsequent items at the lower shelf price. Consumers should check their cash register receipts carefully to ensure that the amount charged was the same as the shelf or advertised price. Where a difference is detected, consumers should request the store comply with the Code. If they refuse, the matter should be raised with the store Manager.
For further information or complaints about the Code, contact the Australian Retailers Association (ARA) on (02) 9290 3766 or visit their website at www.ara.com.au.
Note that the scanning code is an extra entitlement to the provisions of the Fair Trading Act. The scanned price is covered by Section 40 (2) (c) and the shelf price is covered by Section 40 (2) (b). Section 40 (1) states that an item cannot be charged at the higher price if more than one price is displayed.
Price control
The Independent Pricing and Regulatory Tribunal of NSW (IPART) sets maximum prices and undertakes pricing reviews of monopoly services supplied by government agencies such as electricity, water and public transport (including private bus companies). For more information, visit the IPART website.
Since 1 July 1998, the NSW Dairy Industry has been deregulated. The NSW Dairy Corp no longer sets retail prices for milk, and retailers determine these prices. It does however, continue to set the farm gate price and various administrative margins.
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