The Federal Court has found that The Jewellery Group Pty Ltd, the company which operates the Zamel's chain of jewellery stores, misled consumers about the savings to be made during sales.
Australian Competition and Consumer Commission chairman Rod Sims said the court’s decision sends a clear message to businesses big and small, in all areas of retailing.
"It is unlawful to use this kind of advertising and represent that consumers would make savings during a sale when the savings claimed are not real," Mr Sims said.
The court found that Zamel's misrepresented the savings consumers would make from purchasing items during sale periods in respect of 44 jewellery items included in one or more Zamel’s catalogues and a flyer distributed by national letter box drop, in-store, and on Zamel’s website between November 2008 and May 2010.
The court found that, by using statements such as "$99 $49.50" or "Was $275 Now $149", Zamel's represented to consumers who were unaware that they could obtain discounts outside Zamel’s sales periods that they would save an amount being the difference between the higher and lower price if the items were purchased during the sale when that was not the case.
In each instance alleged by the ACCC, the court found Zamel’s had either not sold the items at the higher price, or had rarely sold them at the higher price, in a period of 4 months immediately prior to the sale commencing.
Zamel's conduct involved contraventions of section 52 of the Trade Practices Act 1974*, which prohibits conduct that is misleading or deceptive or is likely to mislead or deceive and section 53(e), which prohibits making a false or misleading representation with respect to the price of goods or services.
In his judgement, Justice Lander described the catalogues and flyer as intended to induce, attract and encourage consumers to purchase the items during the catalogue sales.
The previous criminal prosecution of the former operator of the Zamel’s business concerned circumstances where there had been no sales of items at the higher price in the period before the catalogue sale.
"The court’s decision today has extended this area of the law for the benefit of consumers by making it clear that retailers must not represent savings to be made by consumers during sale periods by the use of two price advertising when they have not sold, or rarely sold, items at the higher price,” Mr Sims said.
The ACCC is seeking penalties in relation to the misrepresentations made by Zamel’s in the May 2010 catalogue, a declaration, corrective advertising, compliance training and costs.
The court will consider submissions on relief at a hearing on a date to be fixed.
*On 1 January 2011 as part of Australian Consumer Law amendments the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010.