The ACCC has some advice on the perils of retailers using ‘bait’ advertising…
What is bait advertising? Bait advertising generally occurs when a business advertises goods at a certain price but does not have a reasonable supply of the goods for customers to buy. This can be an honest mistake. For example, when demand for a particular product is much higher than expected and the retailer genuinely runs out of stock. Advertising sale items and discounted goods are an excellent way of getting customers into your store. While special offers are a legitimate means of enticing consumers, there are rules for this form of advertising. Only make special offers when customers have a fair chance of actually buying the goods at the advertised price.
However, sometimes a business will advertise goods at extremely low prices to entice customers into their store knowing full well they only have a handful of the sale items in stock. The attractive offer is used as bait to lure customers into the store. When customers arrive they are told that the item has sold out. Customers are then urged to buy other higher priced or lower quality goods. This is commonly called a bait and switch scam. Be upfront about limited supply. When advertising a special, be upfront if the item is in short supply or on sale for a limited time. If stocks are genuinely limited, such as in a clearance sale, say so in the advertisement. If the offer is for a limited time, state this in a highly visible, clear and specific manner. Retailers have the option of nominating the time for which an offer is available. However, any restrictions must be clearly stated. For example, statements like ‘Today Only’ or ’Weekend Special’ or ‘Only Until (some stated date)’are acceptable, but must be clear to the consumer. A statement like ‘While Stocks Last’ may seem innocent enough, but it may be considered ‘bait advertising’ if you don’t have sufficient stock to cater to the likely demand your advertising will bring. Once again, it is important to state any qualifications carefully and prominently in an advertisement to avoid confusion and a breach of the Act. There are times when a business cannot reasonably know that the item advertised will not be available for a reasonable time. For example, if other retailers of the product had sold out and demand for it was unusually high, or if the manufacturers were unexpectedly no longer able to produce the item. If there is not a reasonable chance that the goods will be available at the advertised price, the business may have broken the law. Retailers should be able to show that they made the offer in good faith, and had reasonable stocks to meet the likely demand for the advertised goods for the length of the promotion.
What is reasonable? What is ‘reasonable’ will depend on the type of product on special and the length of the sale – a reasonable supply of dishwashers will differ from a reasonable supply of tea towels. It may also depend on how the sale was advertised and the previous sales experience of the trader. For example, it might be reasonable for an electrical appliance retailer to have six refrigerators available for a special sale, but unreasonable for a clothing retailer to promote a special sale on socks if there were just six pairs available.
When running a particular sales promotion or campaign, it may be difficult to judge the amount of stock needed. To determine likely demand, consider previous campaigns and also how your business will respond if the demand overwhelms supply. Don’t ignore the fact that intense advertising campaigns – such as catalogue sales – could generate high levels of customer interest. Trying to determine what would be a reasonable supply of stock can be difficult. A business may underestimate demand for a product and sell out if faced with more customers than they reasonably could expect. The Act makes allowances for this kind of situation. Businesses should, however, be able to demonstrate that the higher demand was unexpected, and that they moved quickly to correct the situation to show that the offer was sincere. ‘No Rainchecks’ should be clearly and visibly stated in an advertisement if retailers are unsure whether stock could be replenished. If the customer agrees, the retailer may choose to offer an equivalent product for the same price.
Checklist To help you avoid misleading customers, ask these simple questions when putting together an advertising campaign.
- What research has been done into the amount of stock needed for the promotion?
- Are there any other factors that could influence expected demand for the advertised products?
- Can the business demonstrate that the offer was made in good faith with reasonable stocks to last the length of the promotion?
- Is the wording in the advertisement clear and accurate?
- Are limitations that could affect the promotion stated clearly and visibly in the advertisement?
- Is the business ready to cope if the promotion is so successful that demand exceeds supply?For more information visit: www.accc.gov.au