When a sale is not a sale
Issued 22 January 2008/no 94
When a sale is not a sale
Retailers are reminded that advertising sale prices that
are no cheaper than every day prices can put them in breach
of the Fair Trading Act.
The reminder comes with the sentencing yesterday in the Christchurch District Court of a bed retailer for making misleading claims about the sale price of beds.
Advek Holdings, trading as Back to Bed, was fined $26,400 on 12 charges of breaching the Fair Trading Act.
Between November 2004 and June 2005 Back to Bed ran an extensive nationwide campaign in print and on radio, advertising beds at special prices. The advertisements claimed that consumers could make “massive savings” and that the retailer had “slashed prices” and offered specific percentages off the “normal” prices of its beds.
However, a Commerce Commission investigation revealed that beds were consistently sold at approximately the same prices during both sale and non-sale periods.
“The advertising over that period misled consumers into thinking that they purchased a bed at a special or sale price, and made a saving, when in fact any savings were illusory.” said Commerce Commission Chair Paula Rebstock.
Ms Rebstock says it is important that retailers provide accurate information about prices so consumers can make informed decisions. “Consumers are attracted to stores that are advertising sales, and are more likely to make a purchase, especially on a big ticket item such as a bed, when they think they are getting a bargain. It is fine to advertise a sale when the discounts are real, but it is misleading to use the term when there is no difference in price.”
“Being able to compare prices and shop around for the best deal is at the heart of competition. Retailers that make misleading claims about the nature of sales not only harm consumers, they undermine the competitive process.” said Ms Rebstock.
Advek Holdings is a Christchurch based company that trades under the name “Back to Bed” as a bed retailer. At the time of offending they had branches in main centres throughout New Zealand (in Auckland, Hamilton, New Plymouth, Palmerston North, Wellington, Christchurch and Dunedin). In November 2006, Back to Bed’s North Island stores were sold to Beds R Us. Advek Holdings now only trades in Christchurch and Dunedin.
Extent of advertising. The ‘sale’ advertisements were run in each of the three major daily newspapers in New Zealand, and also featured on radio. The advertisements were published 43 times over the period of 27 December 2004 – 5 May 2005, and the radio ads were run over a two month period. This was reinforced by marketing materials in store. As a result of the Commission’s investigation, Back to Bed changed their advertising style from August 2005.
Previous prosecutions. In June 2007, 230 Marua Limited, an Auckland leather furniture company was fined a total of $36,000 over misleading claims about the ‘sale’ price of furniture.
In June 2006, clothing and outdoors retailer Kathmandu was fined $28,000 for misleading claims in relation to ‘sale’ items.
The Fair Trading Act. Section 13 (g) of the Fair Trading Act relates to making a false or misleading representation. Court penalties for breaching the Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.