With the festive season now upon us and Christmas fast approaching, retailers will be seeking to employ a range of marketing techniques, including discount sales advertising and pricing promotions, to draw consumer’s attention to their goods and services.
Businesses should be careful, however, to ensure that their marketing techniques do not attract unwanted attention from regulators. Accordingly, businesses should become familiar with the risks associated with sales and pricing promotions so as to avoid misleading or deceiving consumers about the price of their goods and services.
Regulation of sales and pricing promotions
New Zealand’s Fair Trading Act 1986 (“FTA”) prohibits a range of misleading and deceptive behaviours, including prohibiting making a false or misleading representation with respect to the price of any goods or services. These prohibitions apply to both physical stores as well as online retailers. Breaches of the FTA can result in a number of enforcement measures, including fines of up to NZ$600,000 per breach for companies and NZ$200,000 for individuals and can be significantly detrimental to a business’ reputation.
A recent action by the New Zealand Commerce Commission (the regulator responsible for enforcing New Zealand’s fair trading laws) found that PAK’nSAVE Māngere breached its obligations under the FTA by misleading consumers about its pricing promotions. Customers were charged higher prices at the checkout than those displayed on shop shelves or advertised in price promotions (the pricing discrepancies ranged from 18 cents and two dollars). PAK’nSAVE Māngere was charged a fine of $78,000.
Key risk areas
The Commerce Commission has identified some key risks areas in respect of some common pricing techniques used by businesses to promote their goods and services, as well as some tips to prevent misleading consumers:
- offering discounted goods and services – comparing the discounted price with the non-sale price of a good or service (such as the “every day” or “usual” price) can be misleading where the “usual” price has never been charged, has not been charged for a reasonable period of time or has been inflated to exaggerate the discounts available;
- special offers – “specials” must genuinely offer something special such as lower prices or additional features to avoid misleading consumers. Any limitations or qualifications to a special offer (such as limits on items per customer) should be clearly stated;
- price displays – displaying prices which are lower than the actual price at which goods will be charged is misleading. Customers can reasonably expect that the price displayed on goods or on shelves is the price they will be charged at the checkout;
- running sales promotions – sales imply that a lower price than the usual is being charged. Therefore, any goods or services being promoted as part of a sale must be priced below their normal retail price. Businesses should not promote goods ordered specifically as sale stock using “was/now” prices when they were never offered by the retailer for the “was” price;
- making price comparisons with competitors – where goods or services being compared are not exactly the same, there is an inherent risk that the price comparison will be misleading;
- price ranges – claiming goods are on sale “from $10” or have “up to $20” off, when only a small proportion of the items are on sale at $10 or have $20 off can be misleading on the basis that the savings being promoted to consumers are presented as more attractive than is really the case.
General principles for selling sensibly
Any representations made about the price of a business’ goods and services should be:
- accurate; and
Generally, sales should be run for a short duration, sales and pricing promotions should be described accurately and the terms of any offer should not be substantially varied. If you would like further information in relation to sales and pricing in marketing campaigns, please get in touch with Julika Wahlmann-Smith and Janou Kannangara of Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
Julika Wahlmann-Smith has advised on a wide range of corporate and commercial law issues, including reviewing and advising on commercial contracts, terms of trade and distribution agreements, mergers and acquisitions, foreign investment, advertising campaigns, consumer law, and intellectual property rights. Connect with Julika via email or LinkedIn
Janou Kannangara graduated from the University of Auckland with an LLB (Hons) degree, and spent her final semester attending Georgetown Law’s Center for Transnational Legal Studies in London. Connect with Janou via email or LinkedIn