Dual pricing is the practice of comparing the normal sticker price of a product ("the Was price"), with a lower temporary sales price ("the Now price"). Dual pricing is a valuable tool in the retailer's arsenal because it generates a sense of urgency and reward for finding a bargain.
Another related retailer's tool is negotiable prices, where the store has a sticker price and a secret minimum price a salesperson will accept. Negotiation gives the consumer a sense of accomplishment.
Unfortunately, dual pricing practices increasingly fall foul of misleading and deceptive conduct provisions of the Australian Consumer Law, and the ACCC has been particularly active in enforcement.
History of ACCC enforcement Action
In 2002, Allan's Music pleaded guilty to falsely representing a saving between Was and Now prices in the sale period. The Was price had been based on the suppliers recommended retail price, and did not reflect prices actually offered by Allan's Music prior to the sale period.
In 2008, Godfrey's gave an undertaking to the ACCC to settle allegations of misleading and deceptive conduct in relation to the promotion of a Nilfisk A100 vacuum cleaner. The A100 was a new product to be exclusively available from Godfrey's who advertised "Clean Up Sale! Nilfisk $249 1/2 Price $124.50". The A100 had not been previously available at any price in the Australian market.
In 2008, Laura Ashley gave an Undertaking to the ACCC to settle similar allegations. Laura Ashley had offered bed linen for sale with Was/Now prices on the labels. Laura Ashley's strategy was to establish a ''regular price' for a product line by launching the product in a limited number of key stores for a limited time. The product line would then be supplied to all other stores with the Was price based on the previous limited launch, which may have been over 12 months prior.
In 2008, the ACCC failed in an action against Prouds Jewellers, and failed on appeal to the Full Court of the Federal Court of Australia. The Full Court held that a hypothetical purchaser would have understood the Was price represented the price at which the items had previously been offered for sale, and not the price at which the items had actually been sold.
In Prouds Jewellers the ACCC failed because it pleaded the representation was the saving between the sale price and the amount actually paid by consumers before the sale period. It was open to the Court to allow for the possibility that a consumer unaware of the potential for obtaining a discount would in fact have paid the sticker price.
In 2009, the ACCC was successful in an action against Zamel's regarding sale period dual pricing. In this case the Was price did mirror the sticker price prior to the sale, but no consumer ever paid the Was price before the sale period. The ACCC alleged the Was price represented the price to be paid before the sale period, which did not depend on purchasers having knowledge of actual sales prices.
ACCC v Jewellery Group Pty Limited [2012] FCA 848 (the Jewellery Group Case)
In 2012, the ACCC brought another dual price action against Zamels. In this case the court drew a distinction between:
- "Aware" customers, who knew the normal offer price was negotiable and would have known the Was price did not reflect the true price prior to the sale; and
- "Unaware" customers, who did not know that they could negotiate a discount to the normal offer price, and who "would read the catalogues and the flyer as meaning that if they purchased an item of jewellery contained in the catalogues or the flyer, during the period mentioned in the catalogues or flyer, they would save the amount between the prices."
A feature that goes some way to distinguishing the Jewellery Group Case, but should be treated with caution, is that Zamel's had an aggressive discounting policy where if a customer showed interest in a product at the normal price, but was not persuaded to make the purchase at that price, the sales person would automatically and without prompting make an offer to sell the product at a lower price. The sales history of the items in question showed they were rarely, if ever, sold at the Was price prior to the sale period.
Lessons for retailers
Dual pricing is not illegal, but you must be careful in how you phrase your promotional material to avoid allegations of misleading and deceptive conduct. From the cases discussed in this article, we can learn the following lessons:
- Dual pricing should be an accurate representation of genuine savings.
- New products can be promoted at a special "introductory" price and similar terms, but do not make comparisons with the intended normal pricing as this may be taken to imply the product has previously been offered by your store at the intended price.
- You must be able to show the product was offered at the Was price for a reasonable period of time immediately prior to the sale period.
- The Was price must be calculated and supported by a recent history of actual transactions. The normal sticker price is not sufficient, especially if the normal sticker price is rarely the price at which the product is actually sold.
- If you have an aggressive discounting policy, at an absolute minimum the Was price must reflect the price at which staff will make an unsolicited offer to a customer.
If you absolutely must use dual pricing, the Was price should be calculated based on a demonstrable history of actual transactions over a reasonable period of time immediately prior to the sale period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
