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.
Background
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.
ENDS