The District Court recently dismissed the Commerce Commission’s case against Bunnings for alleged misleading and deceptive representations under the Fair Trading Act 1986 (FTA).
In dismissing the Commerce Commission’s case, the Court provided important guidance on the use of marketing tag lines such as “lowest prices”.
Background to the case
Since 2002, Bunnings has built its marketing strategy using the taglines “lowest prices are just the beginning”, “lowest price guaranteed” and “nobody beats our prices”. Bunnings has also promised that if consumers “happen to find a lower price” on the same stocked item, they will beat it by 15%.
Bunnings was not the only retailer using the superlative word “lowest” in its advertising of prices. Mitre 10 has previously advertised products using similar taglines. In May 2011, the Commerce Commission wrote to both Bunnings and Mitre 10 warning them their claims to have the lowest prices may constitute a breach of the FTA. Mitre 10 chose to discontinue its advertising campaign. Bunnings continued with the use of these taglines.
In late 2014, Mitre 10 complained to the Commerce Commission that Bunnings were claiming to have the lowest prices when often their own prices were identical or lower. Other than this complaint, there was no evidence of any other complaints about Bunnings by other competitors or members of the public more generally. Mitre 10’s complaint led to the Commerce Commission opening an investigation into Bunnings’ price advertising.
Following the investigation, the Commerce Commission commenced District Court proceedings in late 2016. The charges brought against Bunnings spanned the period from 17 June 2014 until 29 February 2016. These charges were brought under section 10 FTA, which prohibits misleading conduct in relation to goods, and section 13 FTA, which prohibits false or misleading representations.
The Commerce Commission’s claim was that Bunnings’ advertising conveyed or reinforced that they had the lowest prices in the market. The Commission alleged that this misled customers into thinking Bunnings’ prices were the lowest when, in the Commerce Commission’s view, on a significant number of occasions they were not.
Bunnings argued that its advertising and representations would not be understood to mean that it always had the lowest prices. It argued that the lowest price guarantee supported this. Where a Bunnings product was not the lowest price it could rely on its guarantee. In any event, only 0.11% of Bunnings sales resulted in customers returning after a lower price was found elsewhere. This demonstrated Bunnings’ commitment to having the lowest price.
The key issue was whether consumers would be misled or deceived by Bunnings’ advertisements and representations.
The Court agreed with expert evidence led by Bunnings that the tagline statements on their own would not be viewed by the consumer in a literal way and a degree of “robust realism” must be applied. Consumers would understand such representations “… in the light of [their] general knowledge and experience in worldly affairs” and would take into account the nature of the industry, size of the stores and general impossibility of ensuring that on each day, every product in Bunnings stores were the lowest price. Consumers would also consider the lowest price guarantee alerted them to the possibility that not every Bunnings product was the lowest price. However, where a product was not the lowest price, the guarantee provided a remedy to achieve this guarantee.
The Court found it would be acceptable if Bunnings’ price was not the lowest up to 15% of the time, so long as the lowest price guarantee was there to cure the position by ensuring a consumer could obtain the lowest price.
Much of the judgment considers the expert evidence of both parties. Some of the key issues with the Commerce Commission’s evidence was:
(a) There was no evidence of a series of customer complaints about Bunnings’ advertising or representations; and
(b) There was no survey on consumers view of the meaning of the representations and advertising.
These factors were key contributors to the Court’s finding that, objectively, Bunnings’ advertising could not be considered misleading.
The case provides an important analysis of FTA issues. While businesses must be careful with advertising claims and representations, they are able to make comparative or superlative representations such as “lowest prices”.
Whether a business will be in breach of the FTA for making such a representation will depend on what a consumer will take the representation to mean, and if the claim is able to be substantiated. Potentially, there may be a leeway of 15% where the representation does not have to be ‘true’, provided there is an ability to remedy the representation and ensure its truth.
The Court’s approach was clearly at odds with the Commerce Commission’s strict interpretation of pricing practices. It is clear that the parties have spent significant time and resources litigating the matter, since charges were first laid in 2016, based on differing views as to how consumers would interpret Bunnings’ advertising. Businesses are well advised to take care when crafting marketing material and seek advice where necessary.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.