Summary of Fair Trading Act



1. Trade Practices Covered by the Act
The sale of goods and services involves many different steps — from the setting of the price, to advertising and promotion and making the final sale. At each step traders may break the law if their trade practices are likely to mislead or deceive customers. The examples below include advertising, pricing and sales techniques which may breach the Fair Trading Act, but traders must remember that any misleading or deceptive conduct may be in breach of the Act and result in court action.

False or misleading advertising
False or misleading representations about price
Sales techniques, finance agreements and unfair practices
• Availability of goods advertised
• Comparative advertising
• Condition of goods - new or used?
• Description of goods
• Employment advertisements
• First impressions
• Fine print
• Image advertising
• Origin of goods
• Pictorial representations
• Puffery
• Claims about qualifications and skills
• Sponsorships and endorsements
• Statements about the future
• Tests and surveys
• Words with special meanings
• Visual, verbal and written representations
• Comparative Pricing
• “Free 4" goods or services
• Duty free
• Goods and Services Tax (Sales Tax)
• Hidden or additional costs
• Price ranges
• “Price reductions”
• Promoting a sale — sale types and duration
• Special offers
• Price displays
• Quotes and estimates
• Claims that goods or services are needed
• Debt Collecting
• Delivery of goods
• “Interest free”, “free credit” and lay-by offers
• Harassment and coercion
• Offering gifts and prizes
• Packaging
• Pyramid selling
• Referral selling
• Pro-forma invoicing and inertia selling
• Taking payment without intending to supply as ordered
• Warranties, guarantees and remedies


False or misleading advertising

1. Availability of goods advertised
You should not advertise goods or services which you know you cannot or may not be able to supply. Because of advertising deadlines, some traders place advertisements for goods before they actually have them on hand. Occasionally, they place advertisements for goods ordered from overseas in anticipation of their arrival. You should not do this unless you reasonably expect the goods will be available when the advertisement appears.

Advertising goods and services which you cannot supply in order to lure people into your shop is known as “bait advertising”. It is a breach of the Fair Trading Act. The Act requires traders to supply advertised goods or services at the advertised price for a reasonable (or stated) period and in reasonable quantities.

There is no precise definition of what is meant by “reasonable quantities” and “reasonable time”. In practice, it will depend on the size of the retail outlet, the market in which it is operating, the likely demand based on experience, and the nature and extent of the advertising.

Qualifying statements such as “while stocks last” may still leave you open to charges of bait advertising if reasonable quantities of the advertised product were not available. Any limits on an offer should also be stated: for example, “one per customer”, “offer ends 1st March”.

There may be times when, through no fault of your own, you cannot supply the goods advertised. If this happens, you should promise to supply the goods — at the advertised price — as soon as you can. You should have a “raincheck” system in place to ensure that, if your supply of advertised goods runs out, customers are offered similar goods at the same price or given an assurance that they will be provided with the advertised goods within a reasonable time.

A proper raincheck system not only ensures that your customers’ needs are met, but can also be a defence (under section 19 (3) of the Fair Trading Act) against prosecution when goods or services are not available as advertised. (See section on defences, p.33.)

Examples

A retail hardware store advertised bags of cement at a special discount price. Although the trader had ordered extra bags, demand for the cement was greater than expected and the store had run out within half an hour of opening on Saturday morning. A number of customers arrived later in the day, and complained there was no cheap cement to buy. The trader agreed to supply cement at the special price to those who had missed out. The trader was not prosecuted.

A company advertised a sale of waterbeds on the radio and in newspapers. The newspaper advertisements noted that, for some lines, stocks were limited, but the radio ads did not. Two of the cheaper lines of waterbeds were in fact sold out while the radio ads for them continued to run. The company was convicted and fined under the Fair Trading Act.