The Australian Competition and Consumer Commission has obtained Federal Court orders against used car dealer, Alex Salter Pty Ltd trading as Salters of Moorooka, for excluding additional fees and charges from an advertised price.
The ACCC alleged that in 2001 Salters of Moorooka advertised as part of its 'Massive Markdown Madness' sale a used motor vehicle for $6,787 when, in fact, this vehicle was not available for sale at a price less than $8,400. The ACCC alleged that the advertised price did not include additional costs imposed by the dealer, such as an administration fee of $165. It was also alleged that the advertisement failed to disclose the fact that the advertised vehicle was unregistered and falsely represented that the vehicle was in a condition that enabled the purchaser to take immediate delivery.
The Federal Court orders against Salters of Moorooka and its director Mr Alex Salter, which were by consent, include:
- declarations that the alleged conduct contravened a number of the consumer protection provisions of the Trade Practices Act 1974
- permanent injunctions
- implementation of a trade practices compliance program which complies with the Australian standard AS3806
- an order that Mr Salter undergo trade practices training
- costs.
The injunctions specifically restrain Salters of Moorooka and Mr Salter from representing that a used vehicle is for sale at a particular price without including all fees and charges that the consumer must pay in order to purchase a vehicle.
"Advertising plays an important role in the motor vehicle sales industry - it can give businesses an edge over their competitors and plays a fundamental role in attracting customers", ACCC Chairman, Professor Allan Fels, said today. "Importantly, it can mean the difference between a vehicle remaining in the yard or being sold.
"Like most businesses, motor vehicle dealerships rely heavily on the power of advertising at all levels - from national campaigns using television, radio and press, through to the latest in electronic advertising on the Internet. Whatever the level, consumers expect advertising to be fair, responsible and honest.
"Price is probably the most important influence on a consumer’s purchasing decision. The Trade Practices Act 1974 prohibits false or misleading statements about the price of goods or services.
"The ACCC has become increasingly concerned that a common approach to advertising in the motor vehicle industry is to exclude from the advertised price certain fees and charges which the purchaser must pay in order to purchase a vehicle. Such charges include dealer delivery, REVS search and administration fees - which can amount to hundreds of dollars in excess of the advertised price.
"Not only are consumers unfairly enticed into the car yard, potentially not getting what they expected or costing them time and money, but it is unfair to more ethical dealers who lose business through advertising lawfully.
"The practice of using fine print or other qualifications to mention the existence of these additional fees and charges will not necessarily correct a misleading impression created by other more prominent elements of an advertisement".
The exception is where the fee involves a reimbursement of a statutory charge or tax relating to the transfer of the vehicle which the purchaser would otherwise be directly liable to pay - for example, stamp duty, transfer and registration fees. Dealers may state that these sorts of fees are extra to the price provided:
a) that it is not an all-inclusive 'drive away - no more to pay' offer; and
b) the nature and amount of these fees are clearly and prominently disclosed in the advertisement; and
c) that the payment of these sorts of fees are not a necessary precondition to the supply of the vehicle by the dealer to the purchaser.
The ACCC encourages new and used motor vehicle dealers to adopt industry best practice by truthfully advertising 'drive away – no more to pay'. This style of advertising creates certainty for consumers that they will pay no more than the advertised price to acquire ownership.
"The ACCC will use the orders obtained as a benchmark to raise the standard of advertising in the motor vehicle industry throughout Australia", Professor Fels said.