The Australian Competition and Consumer Commission (ACCC) has issued proceedings against an on-line florist and gift retailer, Bloomex Pty Ltd (Bloomex) for alleged breaches by Bloomex of the Australian Consumer Law (ACL)1 in relation to its pricing and star ratings.
This action follows a warning that the ACCC made to consumers and the online florist industry prior to Valentine’s Day this year, regarding the way certain online florists were representing themselves in their online advertising.2
What did Bloomex allegedly do?
According to the Concise Statement filed by the ACCC in the Federal Court on 8 December 2022, the ACCC has alleged that Bloomex published several misleading representations on its website (Website) as follows:
- Bloomex made representations on its website that its products were on sale or discounted when they were not (Discount Representations);
- that star ratings of Bloomex products were a reliable indicator of customer satisfaction when they were not (Rating Representations); and
- that products could be purchased for a specified price when in fact a surcharge would be applied at checkout (Total Price Representations).
What laws have Bloomex allegedly breached?
The key sections of the ACL which the ACCC has alleged that Bloomex has breached are:
|Section of ACL allegedly breached||Relevant representation|
|Section 48(1) – which prohibits a person, in trade or commerce from making a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the person also specifies, in a prominent way and as a single figure, the single price for the goods or services.||Total Price Representations.|
|Section 33 – which prohibits a person, in trade or commerce, from engaging in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.||Rating Representations.|
|Section 18 – which prohibits a person from engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive.||Discount Representations.
Total Price Representations.
|Section 29(1)(a) which prohibits a person, in trade or commerce, from making false or misleading claims or statements about the goods or services they supply are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use.||Rating Representations.|
|Section 29(1)(g) which prohibits a person, in trade or commerce, from making false or misleading claims or statements about the goods or services they supply have sponsorship, approval, performance characteristics, accessories, uses or benefits.||Rating Representations.|
|Section 29(1)(i) which prohibits a person, in trade or commerce, from making false or misleading claims or statements about the goods or services they supply with respect to the price of goods or services.||Discount Representations.
Total Price Representations.
For almost all Bloomex’s products advertised for sale on the Website between 26 February 2019 and 3 November 2022, two prices were displayed – a price for purchase of the product and a higher price in strike through form. Alternatively, products were advertised for sale with the words ‘50% off’ or ‘Half Price’.
In addition, when a customer clicked on a product, a webpage was displayed showing an image of the product, a re-statement of the strikethrough and purchase price, and underneath the words ‘You Save’, followed by an amount that is the difference (or the approximate difference) between the two prices.
According to the ACCC, the Discount Representations contravened the ACL because Bloomex never sold, nor offered for sale, the products at the original price for which Bloomex claimed it sold the products.
What does the ACL say about ‘was/now’ and other discount representations?
The advertising of discounted pricing by way of strike throughs, percentage discounts or ‘was/now’ pricing is permitted in Australia, provided that such claims do not mislead customers about the savings they may achieve. A business must ensure that statements relating to price comparisons are not misleading about the savings that a customer may achieve. If a business is planning to use comparison pricing in its advertising materials it should consider the following:
- Has the product previously been offered for sale at the ‘was’ price?
- Did the customer have a reasonable period to purchase the product at the ‘was’ price?
If the answer is ‘no’ to either of the above questions, the business should have its relevant advertising materials reviewed to ensure they are compliant with the ACL.
Businesses that make misleading or false statements about their discounts could find themselves in breach of sections 29(1) and 18 of the ACL. Our previous articles here and here go into further detail about the legal and commercial considerations when making discount representations.
The ACCC has alleged that since at least 26 February 2019, Bloomex included next to its products a rating system whereby the product was given a star rating out of five (Star Rating) together with a statement that the relevant Star Rating was based on a certain number of customer reviews (ie 4.3/5 based on 1653 Customer Reviews).
According to the ACCC, the Star Rating was not a reliable indicator of customer satisfaction in relation to the relevant product because there hadn’t been customer ratings since January 2015, the Star Ratings included data from international Bloomex websites such as Canada and the United States and Star Ratings also included ratings provided by visitors to the various Bloomex websites, not necessarily persons who actually purchased the relevant product which was being rated from the Bloomex Australia website.
What does the ACL say about false or misleading rating representations?
The ACL prohibits businesses from making false or misleading representations about the goods that they sell. This includes:
- engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive;3
- the making of false or misleading representations about:
- the quality, style, model or history of a good or service;4
- the sponsorship, approval, performance characteristics, accessories, uses or benefits of goods;5 and
- engaging in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.6
Total price representations
According to the Concise Statement lodged by the ACCC, from at least 10 August 2022, when a customer went to purchase a product, they were required to click through several different webpages before they arrived at the ‘Express Checkout – Billing’ page (Check Out Page). On each of the prior webpages, a price was displayed in relation to a product (Displayed Product Price). However, when the customer arrived at the Check Out Page and had to enter the relevant delivery postcode, the final purchase price for the Product was not the Displayed Product Price. On entering a delivery postcode, the customer was shown a surcharge (ranging between $1.95 and $4.95) which was stated as relating to ‘overhead costs’ due to ‘rampant inflation’ (Surcharge). Even though the Surcharge had to be accepted in order to proceed with the purchase, the ACCC took issue with the fact the Surcharge was not disclosed at any point in time prior to the Check Out Page, alleging that this conduct contravened section 48(1) and section 18 of the ACL.
What does the ACL say about representations concerning pricing?
Section 48 of the ACL is concerned with component pricing and requires companies and persons to prominently specify the single figure price a consumer must pay to purchase the good or service.
If a price is promoted that is only part of the total price of goods or services, it must also include the total price (as a single figure) at least as prominently as the part price. It is also a contravention of the ACL to represent to consumers that the price of a component or components is the total price.
The single price must include any tax, duty, fee, levy or other additional charges (eg GST). It should also include any optional fees or charges pre-selected for the consumer during the purchasing process unless and until they are de-selected by the consumer.
- The ACCC has specifically stated that a 2022/2023 Compliance and Enforcement Priority7 is consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy.
- Businesses must ensure their online reviews and product ratings are accurate and current as they are an important tool that consumers rely on when making purchasing decisions.
- Businesses must display the total price of a product or service, including any surcharges when displaying prices and be cautious with comparative advertising and special offers to ensure their representations are and not misleading.
- As noted in our previous articles the penalties for breaches of the ACL (including section 29) have increased significantly under the Treasury Laws Amendment (More Competition, Better Prices) Act 2022. See here and here for more information about the changes to these penalties.
This article was written by Teresa Torcasio, Partner and Caitlyn White, Senior Associate.
1Competition and Consumer Act 2010 (Cth), Schedule 2 (‘Australian Consumer Law’ or ‘ACL’).
2Australian Competition and Consumer Commission, ‘Find out where your flowers are really coming from this Valentine’s Day’ (February 10, 2022) <https://www.accc.gov.au/media-release/find-out-where-your-flowers-are-really-coming-from-this-valentines-day>.
7Australian Competition and Consumer Commission, ‘Compliance & Enforcement Policy and Priorities’ <https://www.accc.gov.au/about-us/australian-competition-consumer-commission/our-priorities/compliance-enforcement-policy-and-priorities>.