Following admissions by Terania Pty Ltd and Australian Rug Expos Pty Ltd, the Federal Court has found that the two companies engaged in false and misleading conduct.
The court has prohibited the two companies and their agents from engaging in the same conduct in the future and ordered they pay $50 000 to the Australian Competition and Consumer Commission in legal costs.
The court also noted an undertaking to the ACCC by the sole director of Terania and Australian Rug Expos, Mr Barry Solomon, to attend a trade practices law compliance program seminar.
Terania and Australian Rug Expos admitted that the 'was' prices they used for certain products sold at sales conducted at the Darwin Showgrounds and at EPIC, Canberra between 2005 and 2007 were false and misleading.
The two companies also admitted that their television advertising for the sales conducted in Darwin was misleading and deceptive regarding the duration and the clearance nature of the sales. They admitted they did not have reasonable grounds for making the duration and clearance representations in numerous television advertisements.
In his judgment, Justice Mansfield, said: 'Clearly, misleading representations as to price are highly likely to mislead consumers … It is acknowledged that the price was simply created by the respondents and had no proper foundation … It is not merely the gullible who may regard a 'was' price as a real indication of the normal retail price of particular products, at least as offered by and sold by that retailer."
In respect of the duration representations in combination with the 'was' pricing, he noted: 'It was likely to mislead the public, or at least some members of the public, into the belief that sale prices at which they may be able to procure the particular goods will end at a specific time and so induce purchasing at or by that specific time rather than making a purchasing decision after reflection.'
Justice Mansfield also reached the conclusion that, having regard to the extensive associated television advertising, the imminent deadline of the asserted sale, and the implicit message that prices would be reduced and perhaps greatly reduced towards its conclusion, the clearance representations for each sale extended beyond mere puffery.
The ACCC instituted legal proceedings in the Federal Court in March 2007 alleging Terania and/or Australian Rug Expos misrepresented in television advertisements for rug and manchester sales in Darwin, that:
- the sales would end sooner than they did
- all stock would be sold, given away or otherwise disposed of at each sale.
The ACCC further alleged that Terania and Australian Rug Expos falsely represented, through labelling manchester products with 'sale price stickers' and 'was price stickers', that these products had previously been sold by them at the higher 'was' prices.
Terania and Australian Rug Expos conducted rug and manchester sales in various locations throughout Australia for temporary periods of time at hired venues. Following Terania and Australian Rug Expos consenting to the proposed orders submitted to the court, the two companies ceased trading and Terania sold its assets.
Nevertheless, the court ordered Terania and Australian Rug Expos to implement and maintain trade practices compliance programs, in the event that they again engage in trading activities.
'Travelling sales that claim to be clearance sales and generate a sense of urgency within consumers to attend and purchase goods have become a common feature in the marketplace,' ACCC Chairman, Mr Graeme Samuel, said today.
'The use of 'was' price labels indicating a substantially higher price than that which the goods are offered at the sale adds to this impetuous to purchase the goods. Consumers should not be tricked into making an urgent purchase which reduces their ability to determine whether the price of the goods is a genuine bargain. Such conduct harms not only the consumers but also local businesses that are advertising within the law.
'It is important that businesses that seek to advertise in this manner ensure they have a reasonable basis for making such claims.'