Forty Winks' wake-up call on comparative pricing

By Chris Broadbent.

Key Points:
Products or services advertised with a "was" price should accurately reflect a comparison between the actual previous price offered and the price "now" being offered.

With the Christmas sales bonanza around the corner, retailers intending to engage in comparative "was/now" pricing should carefully consider whether claims comparing current selling prices to their former prices can be substantiated. A failure to do so may result in those retailers contravening laws that prohibit misleading or deceptive conduct.

An example of the risks in this area is provided by a recent Australian Competition and Consumer Commission (ACCC) investigation into comparative pricing claims made by a national bedding and furniture retailer, Forty Winks.

Background

Forty Winks engaged in a "was/now" advertising campaign by featuring several items of bedding and furniture in its Celebration Sale catalogue at discounted prices. Consumers were told of "$ savings" by comparing Forty Winks' "normal ticketed price" with the discounted price.

The catalogue also included a fine print disclaimer stating that the products were usually sold below the normal ticketed prices.

The ACCC investigation

The ACCC was concerned that consumers were being misled about the savings claimed on the advertised products in the sale catalogue. Many of the claimed savings were overstated, because Forty Winks usually sold its products at less than the ticketed price. Because of this, the claimed savings for the advertised products may have given consumers a false impression that they were making a more significant saving than they in fact were. Although the catalogue contained a fine print disclaimer, the ACCC considered it was not prominent enough to qualify the overall false impression created by the catalogue.

The chairman of the ACCC, Graeme Samuel, said: "The ACCC was concerned consumers were being misled about savings claimed on some products sold at Forty Winks outlets." Because of this false impression, the ACCC considered that the advertising was misleading and contravened the Trade Practices Act 1974.

As a result of the ACCC's investigation, Forty Winks has provided a court-enforceable undertaking that it will only advertise price reductions based on the usual selling prices for products at its stores, unless there is a clear and prominent explanation that specifies the alternative price reference point used. In addition, Forty Winks will implement a robust trade practices compliance program.

Lessons to be learnt

The main lesson from the Forty Winks case is that retailers must ensure that pricing claims are accurate and do not mislead or deceive consumers. Products or services advertised with a "was" price should accurately reflect a comparison between the actual previous price offered and the price "now" being offered.

It is important to review the overall layout of any pricing promotion to make sure that nothing in the print size, photos or layout might give consumers a wrong impression. Retailers should also consider the honesty of the pricing claims; in particular, whether the actual previous price has applied for a reasonable period before the discount offer starts, such that it represents a genuine price and not just a price that has been inflated to make a subsequent sale price seem more attractive.

At its most basic, consumers need to receive the savings that they thought they were getting.

The Forty Winks case again confirms that disclaimers in advertising need to be sufficiently prominent to negate any otherwise misleading impression given by the advertisement. If an advertisement is otherwise boldly misleading, a fine print disclaimer will generally not correct the underlying misleading impression. All marketers need to be careful to make sure that fine print disclaimers are not used to negate the major message(s) of an advertisement. History shows that the courts (and the ACCC) will probably not be convinced.