Zamel’s slapped with $250,000 fine for misleading consumers: What your business needs to do to avoid a fine

The Federal Court today fined The Jewellery Group, which trades as Zamel’s, $250,000 for misleading consumers about savings made on jewellery in a case Zamel’s says will have “significant implications” for all retailers.

Justice Lander found Zamel’s had misrepresented the savings consumers would make from purchasing items during sale periods for 44 jewellery items featured in one or more Zamel’s catalogues and a flyer distributed nationally by letter box drop, in-store and on Zamel’s website.

The court found that by using statements such as “$99 $49.50” or “WAS $275 NOW $149”, Zamel’s represented to consumers 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.

Of the 44 jewellery items identified, the court found Zamel’s had either not sold the items at the higher price, or that it had sold a very limited quantity at the higher price prior to the sale commencing.

Justice Lander said in his judgment the $250,000 penalty reflected the seriousness of the conduct.

“Zamel’s should be deterred from engaging in any further conduct of this kind. Moreover, the penalty must be sufficient to deter any like-minded retailer from engaging in the same conduct.”

The case was brought by the Australian Competition and Consumer Commission and ACCC chairman Rod Sims said in a statement the penalty was a clear message to businesses that the court takes a dim view of this sort of conduct.

“The ACCC has taken steps to ensure consumers are not misled as to savings they may make when retailers advertise goods. In this very competitive market, consumers are vulnerable to false and misleading tactics and the penalty imposed by the court today should serve as a stern warning to other retailers,” Mr Sims said.

Zamel’s is also required to publish corrective notices in newspapers and on its website, implement a trade practices compliance program and pay the ACCC’s costs.

Chris Rann, spokesperson for Zamel’s, told SmartCompany the judgment by the ACCC was very disappointing.

“The judgment has been acknowledged by the ACCC to have significantly extended the law in this area,” he says.

“Zamel’s has at all times acted in a way that it believed was compliant with its legal obligations, and consistent with widespread industry practice.”

Rann says Zamel’s intends to appeal the decision as it has always tried to market its products in accordance with the law.

“The judgment has significant implications for all of retail in Australia,” he says.

Sally Scott, partner at law firm Hall & Wilcox, says what is known as “was/now” pricing is a common issue particularly amongst jewellery retailers, with Prouds Jewellers caught for similar misleading advertising in 2008.

“Even businesses that don’t use ‘was/now’ pricing but advertise with reference to a particular level of savings or discounting need to take note of this issue,” she says.

“If a business is going to advertise using ‘was/now’ pricing, or with a reference to the level of savings and discounting, then the business needs to ensure it does not mislead in relation to the original price.”

Scott recommends if a business wants to refer to a ‘was’ price or to the level of savings or discounting, the business needs to ensure that it had actually offered those items for sale at the original price and that the items were offered for sale at that price for a reasonable length of time immediately prior to the sale commencing.

“A mere list price won’t be enough,” she says.

“The business will need to prove that it had actually offered the items for sale at the original price.”

Scott says businesses should keep records evidencing the offers made at the original price and says there is no set rule as to how long an item needs to be sold at the higher price before a sale.

But she says selling it for a day at the higher price won’t be enough and the higher price should be offered for at least as long as the promotional period.

Scott says the fine of $250,000 indicates the court and ACCC are cracking down on this sort of behaviour by businesses.

“This is a large penalty and suggests that the court and the ACCC saw a need to send a message to both Zamel’s and other businesses that this type of advertising is not acceptable,” she says.