Warning to SMEs as Harvey Norman franchisees fined for bait advertising

Small businesses are warned to pay attention to their catalogue advertising after six Harvey Norman franchisees were fined for advertising items they could not supply.

The franchisees, all based in WA, have each paid fines of $6,600 for advertising Kodak’s Playsport pocket video camera in a catalogue without being able to supply that product.

Bait advertising, when a trader advertises goods at a certain price but does not have a reasonable supply, is a contravention of the Trade Practices Act.

The definition of “reasonable supply” depends on several things, including the type of product and the way it was promoted or advertised. If a trader has genuinely underestimated the popularity of a sale product, it may not be considered bait advertising.

The Australian Competition and Consumer Commission chairman Graeme Samuel says bait advertising can carry hefty fines, as evidenced by the Harvey Norman franchisees.

“Promotional material must be accurate and there must be adequate stock of the advertised product to meet reasonable demand, otherwise businesses risk bait advertising, which is illegal,” Samuel said in a statement.

The news comes on the back of a revelation that the ACCC has collected more than $3.6 million in penalties for a range of offences, just one year after the introduction of new consumer laws.

The commission has issued more than 50 infringement notices under the Australian Consumer Law, introduced in April last year, amounting to fines of more than $300,000.

According to the ACCC, offences include inadequate product safety guidelines, and misleading prices and warranties. Phone companies, and computer and clothing manufacturers, are among the worst offenders.

The ACCC identifies bait advertising as a prime example of misleading pricing, but says businesses also need to be aware of comparative pricing.

“Comparative pricing is a marketing tool used by traders to compare current selling prices to their former or future prices,” an ACCC spokesperson says.

“As with all forms of advertising, any claims made by traders in relation to price must be accurate and must not mislead or deceive [customers].”

A trader risks breaching the law if it:

• Advertises products at a specific price when it does not have a reasonable supply for consumers to purchase.
• Makes inaccurate or misleading price comparisons.
• Represents that an advertised price is the total price that a customer will have to pay when it is not.