Zamel’s guilty of misleading consumers - again

4.3 k views | Posted August 21, 2012 | By Dean Millard • Staff Journalist

The Federal Court has found that the Jewellery Group, the company that operates Zamel's, misled consumers about the level of savings to be made during sales over an 18-month period.

The Court found that Zamel’s, which at the time of the offences consisted of between 93 and 101 stores, misrepresented the savings consumers would make from purchasing items during sales periods in respect of 44 jewellery items included across six Zamel’s catalogues and one flyer distributed by national letter box drop, instore and on Zamel’s website between November 2008 and May 2010.

The Court found that Zamel’s use of two-price advertising statements, such as “~~$99~~ $49” or “Was $99 Now $49” led consumers who were unaware that they could obtain discounts outside of Zamel’s sales periods that they would save an amount equal to the difference between the two prices if the items were purchased during the sale. The Australian Competition and Consumer Commission argued successfully that this was not the case.

The court found that discounting was common practice in Zamel’s stores and as such the ”was” price was rarely, if ever, the price that was paid by customers outside of the sale period, and therefore the actual savings during the sales event were not as significant as those implied in the advertising.

Official findings
In his findings, Justice Bruce Lander said given Zamel’s claim that only five to 10 per cent of people did not try to negotiate on the price of a purchase, and therefore could be deemed to be unaware of the possibility of doing so, taking into account the run of catalogues distributed for the offending advertising campaign was three million meant that between 150,000 and 300,000 consumers could have been deceived by the campaign. He said he believed that figure would likely be higher, but it was impossible for him to say exactly how much higher.

“A significant number of the unaware readers of the catalogues and the flyers would not have paid the strike through or 'was' price and achieved the represented savings, if they had purchased any of the 44 items of jewellery advertised in the catalogues or the flyer before the relevant catalogues or flyer were published and before the sale period,” Lander said in his findings.

“They would not have done so because the items were sold at a non-sale price, which was less than the strike through or 'was' price, or because of Zamel’s price negotiation policy, which provided discounts to consumers in respect of all of the items of jewellery for sale," Landers continued. "The savings representation was false and thereby the respondent engaged in conduct that was misleading and deceptive or, at least, likely to be misleading or deceptive.”

ACCC chairman Rod Sims said the court’s decision sends a clear message to businesses in all areas of retailing.

"It is unlawful to use this kind of advertising and represent that consumers would make savings during a sale when the savings claimed are not real," Sims said. “The court’s decision has extended this area of the law for the benefit of consumers by making it clear that retailers must not represent savings to be made by consumers during sale periods by the use of two-price advertising when they have not sold, or rarely sold, items at the higher price.”

JAA Code of Conduct
The Jewellers Association of Australia’s Code of Conduct covers comparative price advertising, however it only requires a retailer to demonstrate that such merchandise has been or could be ordinarily offered for sale at that price in the relevant market in which the comparison has been made”. This contrasts the Court’s finding, in which there has been a clear distinction drawn between the price at which the products were advertised and at which they were actually sold.

The ACCC is seeking penalties in relation to the misrepresentations made by Zamel’s in the May 2010 catalogue, a declaration, corrective advertising, compliance training and costs. The court will consider submissions on relief at a hearing on a date to be fixed.

It is not the first time that Zamel’s has been reprimanded for its use of “two-price” advertising. In 2006 the ACCC launched legal proceedings against the then family owned Zamel’s in regards to its 2005 Christmas catalogue. The Federal Court found that Zamel’s had not sold the items at a strikethrough price for a reasonable period prior to the sale.

More reading
ACCC prosecutes Zamel's for 'misleading' price ads