"Was/Now" Pricing: Rules Around Discount Claims in New Zealand
"Was/Now" pricing, also known as comparative pricing, is a common marketing strategy where a business advertises a product at a reduced "Now" price, comparing it to a previous, higher "Was" price. In New Zealand, these discount claims are subject to strict rules under consumer protection legislation, primarily the Fair Trading Act 1986, to ensure they are not misleading.
The Fair Trading Act 1986 and Misleading Pricing
The Fair Trading Act 1986 (FTA) is the principal legislation that prohibits misleading and deceptive conduct by businesses. Its purpose is to protect consumers from unfair trading practices and to promote fair competition [Source: Fair Trading Act 1986, s 1A].
General Prohibition on Misleading Conduct
Businesses must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This general prohibition applies broadly to all aspects of a business's operations, including how prices are advertised. If a "Was/Now" price comparison creates a false impression about the genuineness or extent of a discount, it could breach this section.
False or Misleading Representations About Price
More specifically, the FTA prohibits businesses from making false or misleading representations concerning the price of goods or services [Source: Fair Trading Act 1986, s 13(i)]. For "Was/Now" pricing, this means that the "Was" price must be a genuine, previous price at which the goods were openly offered for sale for a reasonable period immediately before the sale, or a genuine price at which the goods are regularly sold. If the "Was" price is inflated, fictional, or not genuinely a recent selling price, the representation of a discount would be considered misleading.
Unsubstantiated Representations
Businesses must also have reasonable grounds for making any representation, including those about prices or discounts [Source: Fair Trading Act 1986, s 23]. This means that before advertising a "Was" price, a business must be able to substantiate that the product was actually offered at that price for a sufficient period immediately prior to the sale. If a business cannot provide evidence for the "Was" price, the claim could be an unsubstantiated representation, which is a breach of the FTA.
Examples of misleading pricing practices include:
- Advertising a "Was" price that the product was never actually sold at.
- Briefly raising a price to an artificial "Was" price just before a sale to create a false discount impression.
- Comparing a "Now" price to a recommended retail price (RRP) without clearly stating that the RRP is not the actual previous selling price.
The Consumer Guarantees Act 1993
The Consumer Guarantees Act 1993 (CGA) provides a set of minimum guarantees for goods and services purchased by consumers [Source: Consumer Guarantees Act 1993, s 2]. While the CGA does not directly govern the legality of pricing claims themselves, it ensures that once a purchase is made, consumers have rights regarding the quality, fitness for purpose, and other aspects of goods and services. For example, if a consumer is induced to buy a product due to a misleading price, and the product then fails to meet a guarantee, the CGA would provide remedies such as repair, replacement, or refund [Source: Consumer Guarantees Act 1993, s 18]. The primary legislation for challenging the legitimacy of the discount claim itself remains the FTA.
Obligations on Businesses
Businesses have an obligation to ensure that all pricing claims, including "Was/Now" pricing, are clear, accurate, and not misleading. They must be able to substantiate any claims made about price reductions or comparisons [Source: Fair Trading Act 1986, s 23].
Consequences for Breaching the Fair Trading Act
Breaches of the Fair Trading Act can result in significant penalties. The Commerce Commission, which enforces the FTA, can take enforcement action, including court proceedings. Penalties can include fines of up to $200,000 for individuals and $600,000 for body corporates (companies) for each breach [Source: Fair Trading Act 1986, s 40]. Courts can also issue injunctions, order corrective advertising, or require compensation to consumers who have suffered loss or damage due to misleading conduct [Source: Fair Trading Act 1986, s 42, s 43].
When to Seek Independent Legal Advice
Individuals or businesses seeking to understand their specific rights or obligations under consumer law, or who believe they have been affected by misleading pricing practices, should consider contacting Community Law Centres for free legal assistance or consulting with a qualified legal professional. The Commerce Commission also provides guidance for businesses and consumers on fair trading practices.