Full Federal Court disapproves of Dell's earlier price advertising

20 December 2002

The Full Federal Court, by majority, today declared that advertisements published by computer giant Dell Computer Pty Ltd prior to November 2001 breached section 53(e) of the Trade Practices Act 1974.

The advertisements did not disclose the compulsory nature of Dell's delivery charges – customers could not purchase a Dell computer for its prominently advertised price as an additional delivery charge of up to $99 generally applied. The decision expands on the earlier finding of the trial court that the advertisements contravened section 52 of the Act.

The trial court had ruled that from about June 1994 to 30 November 2001, Dell had published advertisements that were misleading or deceptive in breach of Section 52 for not making clear to customers that they had to pay a compulsory delivery charge on top of the advertised price for Dell computers. The trial court made injunctions restraining Dell from advertising in that manner in the future and ordered Dell to publish corrective advertisements in major newspapers in each capital city of Australia explaining how Dell misled its customers. The trial court ordered Dell to pay the ACCC's costs of the proceedings.

However, the trial court found that the advertisements were not in contravention of sections 53(e) and 53C, dealing with a false or misleading representation with respect to the price of goods and specifying the cash price of goods. The ACCC appealed the section 53(e) and 53C findings. The Full Court found a breach of section 53(e) but no contravention of section 53C.

“This decision makes clear that advertisers need to be upfront about additional costs. Compulsory costs should not be tucked away in the fine print. Customers should not have to scour an advertisement for additional compulsory charges”, ACCC Chairman, Professor Allan Fels, said today.

“Price is a powerful magnet for customers. First and foremost, customers want to know the bottom line. They need it to make an easy comparison with competitor’s prices”.

Background

Dell commonly advertises by full-page advertisements in popular computing magazines, major newspapers and on the Internet.

In the advertisements in question, prices were prominently displayed next to images of Dell computers. But most customers could not purchase the computers at these prices. They were forced to pay an additional delivery charge of up to $99 (the amount varied according to model purchased). The delivery charge was compulsory as Dell is a direct marketer without a shop front and its computers are only available by way of delivery by Dell to its customers.

The ACCC's court action followed complaints from consumers that Dell computers could not be purchased at the advertised price, and in fact were in some cases about $99 dearer than advertised.

The Dell advertisements in question did include references along the lines of "delivery additional" or "additional delivery charge of up to $99" either next to the advertised price or in the fine print at the bottom of the advertisement. But the trial court found that these references did not make clear to customers that delivery was compulsory and could lead customers to think they could avoid a delivery charge by collecting the computer themselves. In reality, most customers had no choice but to have the computers delivered to them at a cost. Accordingly the trial court found a breach of section 52 of the Act. The decision meant advertisers had to make clear to customers when there are compulsory charges in addition to advertised prices.

The Full Court, by its majority decision, has affirmed that compulsory charges must be properly disclosed.

Release number: 
MR 335/02
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