Motor vehicle advertising

The motor vehicle industry relies on advertising to promote its products. As price plays a major role in the decision to buy a motor vehicle, so does price advertising in attracting customers. It is critical that businesses act lawfully when advertising and promoting their vehicles. The Australian Consumer Law (ACL), which is contained in a schedule to the Competition and Consumer Act 2010, affects the way you advertise and promote your vehicles, ensuring that all businesses play fairly, for the benefit of both themselves and consumers.

Broadly, the ACL requires that you act fairly and honestly in your dealings with consumers. Consumers should be able to rely upon your advertising, your promotional materials and the words and actions of your staff. The essential rule is don't mislead. Following this rule will assist you and your staff to avoid breaching the ACL.

• What are some 'danger areas' I should be aware of?
• Multiple pricing
• Component price representations
• What parts of the ACL relate to price representation?
• Use of disclaimers
• Advertising discount prices
• Pictorial representation of vehicles
• Bait advertising

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What are some 'danger areas' I should be aware of?

Motor vehicle retailing is a complex business, with some industry 'norms' that give rise to unique problems with advertising and selling activities. There are a number of specific concerns related to the advertising and promotion of motor vehicles and their interaction with the ACL, including the following:

Multiple pricing

The ACL requires under s. 47 that if you display the same motor vehicle with more than one price – ‘with multiple parts’ - you must sell it for the lowest displayed price or withdraw the vehicle from sale until the price is corrected. An incorrect price published in a catalogue or advertisement can be corrected by a retraction published to a similar circulation or audience to the original advertisement.

Component price representations

If you choose to cite a particular component of a price in an advertisement, s. 48 of the ACL requires that you must also provide consumers with a prominent single (total) price for goods or services—as it is able to be quantified at the time you make a price representation. If a price represents some but not all of the components, it risks contravening the ACL because it could mislead consumers into thinking that a product or service is being offered at a lower price than it actually is.

While you can still use component pricing, the law requires you to provide consumers with a figure for the total price at least as prominently as the most prominent component. This means that a consumer should be able to easily identify the total cost of a vehicle, at least as easily as they may identify a component or part of that total.

What parts of the ACL relate to price representation?

The ACL does not require businesses to state the prices of motor vehicles in their advertisements. However, a failure to advertise prices may in certain circumstances contravene the ACL if it constitutes false or misleading conduct under ss. 18 and 29(i) of the ACL. For example, an advertisement that implies a vehicle is very ‘cheap’ when in reality it turns out to be very expensive may be misleading.

Use of disclaimers

Disclaimers, qualifications or fine print may be used to clarify what the main offer does or does not include. They should only be used to clarify the meaning or intent of a statement and not to correct a misleading impression created by the more prominent aspects of the advertisement. To be effective, a disclaimer must be prominent, placed in close proximity to the main representation, clear in meaning and address the issue being clarified. If not, the overall effect of the advertisement may be misleading and deceptive, and likely to breach the ACL.

For example, where a price of ‘$29 990*’ is given and the asterisk is used to clarify the basis on which the price was calculated, the asterisked information should be clearly linked and close to this main price—‘*Price based on delivery in July–December within southern Melbourne suburbs’.

The question of whether fine print is sufficiently prominent is a matter of judgment and depends on the size, location and detail of the fine print in relation to the headline advertisement.

Advertising discount prices

A discount price claim must accurately reflect a comparison between the most recent price and the current discounted price for that vehicle. If not, it is likely to mislead or deceive consumers.

The ‘most recent price’ used in the comparison should be the price at which the vehicle was available for a reasonable period of time before the discount offer commences and not just a price that has been inflated to make a subsequent sale price seem more attractive. The discount offer should be a genuine price decrease. 'Mark up to mark down' is a dangerous procedure, risking substantial fines under the ACL.

Pictorial representation of vehicles

A motor vehicle shown in an advertisement should be the same model and have the same visible accessories and price as the vehicle offered for sale at the dealership. If not, it is likely to mislead or deceive.

The phrase ‘picture for illustrative purposes only’ (or other similar expressions) accompanying a pictorial representation that is not the same as the vehicle on offer can mislead consumers in most circumstances. The misleading or deceptive feature of the advertisement is unlikely to be removed by a disclaimer.

When a second-hand motor vehicle is depicted, but a wider range of vehicles is on offer, at least one of the vehicles available for sale should be the same model and have the same visible accessories and price as the vehicle in the advertisement. If it is not possible for a photograph of the actual second-hand motor vehicle to be used in an advertisement, it is appropriate to use a representation of the same make and model of vehicle, together with a prominent disclaimer.

When an advertisement relates to a range of models, but only one model is pictured, take care when advertising a price to ensure that consumers are not misled or deceived about the price of the advertised vehicle.

Manufacturer advertisements showing models not available in Australia accompanied by the disclaimer ‘not the Australian model’ may risk misleading consumers, particularly if a RRP accompanies the advertisement and the model for sale in Australia differs substantially in quality or external features from the vehicle shown in the advertisement.

Bait advertising

The ACL prohibits advertising goods at a specified price if the advertiser is aware, or should reasonably have been aware, that they would not be able to supply reasonable quantities at that price for a reasonable period. Bait advertising occurs when motor vehicles are advertised at an attractive price, but when the consumer goes to buy the motor vehicle they are not available and the dealer seeks to switch the consumer to a higher priced or differently optioned motor vehicle.

A dealer advertising motor vehicles for sale at a specified price must ensure that the vehicles are available at that price for a reasonable period and in reasonable quantities.

As motor vehicle stock is sometimes purchased against orders received, it is acceptable to have the vehicle available subject to a reasonable delivery time.