Retailer pays for dodgy discount offers

The misleading use of two classic advertising slogans has landed a discount rug and manchester retailer in hot water following a prosecution by the competition watchdog.

Late last week the Federal Court ordered Australian Rug Expos and Terania to pay $50,000 and the man who controls both companies, Barry Solomon, to attend a trade practices compliance program.

The companies attracted the attention of the Australian Competition and Consumer Commission after using two of the oldest selling tactics in the book – tagging products with messages such as “was $109, now $26” and TV ads telling consumers that a “sale ends Sunday”.

The problem was that in both cases the companies’ statements were false. Solomon admitted to the court that many of the products advertised for sale had never been on the market at the “was” price and were in fact being sold for their usual price.

“The ‘was’ price was simply created by the respondents and had no proper foundation,” Justice Mansfield said. “Consumers were likely to have been misled into believing that the goods in question had previously been offered for sale at the ‘was’ price, so that the sale price represented a significant reduction from the normal retail price. That may induce consumers to buy those products when they would not otherwise do so.”

As for the sale ending on Sunday, that just didn’t happen – on one occasion the companies moved the advertised end of sale date forward four times, effectively extending its length by two weeks.

ACCC chairman Graeme Samuel says the ruling should serve as a warning to retailers that they should not use advertisements that seek to trick consumers into making purchases.

“Travelling sales that claim to be clearance sales and generate a sense of urgency within consumers to attend and purchase goods have become a common feature in the marketplace,” Samuel says. “It is important that businesses that seek to advertise in this manner ensure they have a reasonable basis for making such claims.”

Samuel has also moved to assure business owners that new laws against predatory pricing will result in the ACCC bringing more cases against big business bullies.

In a speech to a competition law conference in Sydney over the weekend, Samuel said the ACCC will be well placed to take action against anti-competitive conduct once the Government’s proposed new predatory pricing laws come into effect.

“By identifying the real impediments that have prevented the law from functioning properly, the Government is promising to clear aside the last remaining major blockages that have prevented more successful cases from flowing,” Samuel said. “The result of more cases now being able to proceed will be a win for all those who look to the Trade Practices Act 1974 to protect the competitive process.”

Read more about misleading advertising and predatory pricing laws