How far can you go? Trade Commission lawsuits against Bunnings dismissed
The District Court recently dismissed the Trade Commission case against Bunnings for misleading and deceptive allegations under the Fair Trading Act 1986 (ALE).
By dismissing the Trade Commission case, the Court provided important insights into the use of marketing slogans such as “lowest prices”.
Context of the case
Since 2002, Bunnings has built its marketing strategy using the slogans “lowest prices are just the beginning”, “lowest price guaranteed” and “no one beats our prices”. Bunnings also promised that if consumers “find a lower price” on the same item in stock, they will beat it by 15%.
Bunnings was not the only retailer to use the superlative word “lowest” in its price advertising. Miter 10 has already advertised products using similar slogans. In May 2011, the Trade Commission wrote to Bunnings and Miter 10 warning them that their claims for the lowest prices could violate the FTA. Miter 10 has chosen to stop its advertising campaign. Bunnings continued with the use of these slogans.
At the end of 2014, Miter 10 complained to the Trade Commission that Bunnings claimed to have the lowest prices when often their own prices were the same or lower. Other than this complaint, there was no evidence of other complaints about Bunnings by other competitors or members of the general public. Miter 10’s complaint led the Trade Commission to launch an investigation into Bunnings’s price advertising.
As a result of the investigation, the Trade Commission initiated proceedings in the district court at the end of 2016. The charges against Bunnings covered the period from June 17, 2014 to February 29, 2016. These charges were laid in under Article 10 FTA, which prohibits deceptive behavior in relation to goods, and Article 13 FTA, which prohibits false or misleading statements.
The Trade Commission’s claim was that Bunnings’s advertising conveyed or reinforced that they had the lowest prices in the market. The Commission alleged that this misled customers into believing that Bunnings’s prices were the lowest when, in the opinion of the Trade Commission, on a significant number of occasions they did not. were not.
Bunnings argued that her advertising and portrayals would not be interpreted to mean that she always had the lowest prices. She argued that the lowest price guarantee supported this. When a Bunnings product was not the cheapest, it could count on its warranty. In any event, only 0.11% of Bunnings sales resulted in customers returning after a lower price was found elsewhere. This demonstrated Bunnings’s commitment to having the lowest price.
The key question was whether consumers would be misled or deceived by the advertisements and performances of Bunnings.
The Court agreed with the expert evidence led by Bunnings that the slogan statements in themselves would not be perceived by the consumer literally and to some extent “”robust realismMust be applied. Consumers would understand such representations “… the light at [their] general knowledge and experience in world affairsAnd take into account the nature of the industry, the size of the stores and the general inability to guarantee that every day every product in Bunnings stores was at the lowest price. Consumers would also consider that the lowest price guarantee alerted them to the possibility that not all Bunnings products were the lowest prices. However, when a product was not the lowest price, the warranty provided a remedy to obtain that warranty.
The Court ruled that it would be acceptable for Bunnings’s price not to be the lowest up to 15% of the time, as long as the lowest price guarantee was there to remedy the situation by ensuring that a consumer can get the lowest price.
Much of the judgment takes into account expert evidence from both parties. Some of the main issues with the Trade Commission evidence were:
(a) There was no evidence of a series of customer complaints regarding the advertising or performances of Bunnings; and
(b) There has been no survey of consumer opinion on the meaning of representations and advertising.
These factors largely contributed to the Court’s conclusion that, objectively, Bunnings’s advertising could not be considered misleading.
The case provides an important analysis of the issues relating to the FTA. Although companies should be careful with advertising claims and representations, they are able to make comparative or superlative representations such as “lowest prices”.
Whether a business is in breach of the FTA for making such a statement will depend on what a consumer considers the statement to mean, and whether the claim can be justified. Potentially, there may be a 15% margin when the representation does not need to be “true”, provided that there is a possibility of remedying the representation and ensuring its veracity.
The Court’s approach was clearly at odds with the strict interpretation of the Commerce Commission’s pricing practices. It is clear that the parties have spent a great deal of time and resources arguing the case, since charges were first laid in 2016, based on differing views on how consumers would interpret the matter. Bunnings advertisement. Businesses are well advised to be cautious when developing marketing material and to seek advice when necessary.