Business Law

Businesses beware: Bait advertising is prohibited in Australia

Published in: June 2017

Australians are pretty fortunate that for the most part, advertisements will be an accurate reflection of the type of product or service being purchased. However with that being said, there may be unfortunate instances where a corporation or person may advertise a service or product that is designed to gain the interest of the consumer, but instead, the more attractive product or service is really a lure to get the customer to purchase another product or service that may be higher priced: this practice is known as bait advertising and is prohibited under the Australian Consumer Law (the ACL).

The Australian Consumer Law and bait advertising

Section 35(1) prohibits a person who is involved in trade and commerce to advertise goods or services for supply at a specified price if:

 

  • there are reasonable grounds for believing that the person will be unable to offer the goods or services at that price for a period that is, and in quantities with regards to:

 

o   the nature of the market in which the person carries on the business; and

o   the nature of the advertisement and the person ought to have been aware of those grounds.

Under the s 35(1) provisions, the element of intent does not need to be shown if a person had reasonable grounds, or ought to have been aware on reasonable grounds, that they would be unable to comply with the advertisement.

Furthermore, the bait advertising provisions also places an obligation on a person who is involved in trade or commerce, to supply the goods or services at the advertised price for a reasonable period of time and in reasonable quantities in regards to goods, as outlined in s 35(2), whilst having a regard to the nature of the market in which the person carries on business, and the nature of the advertisement.

When is an individual considered to be in contravention of the bait advertising provisions?

For a person to be found liable of contravening the s 35(1) provisions of bait advertising is dependent on the person’s knowledge during the time of when the advertising was directed to the consumer. The s 35(2) provisions, creates an absolute liability towards the advertiser, by obliging him or her to offer the goods and services which is advertised to be supplied.

One of the elements of the s 35 provisions is that of reasonableness, and reasonableness will be dependent on the nature of the product that is being advertised, as well as the length of the sale of the advertised product. In ascertaining reasonableness, past practices may also be taken into account.

The definition of consumer

It is important to note that under s 3 of the ACL, a person will be considered as a ‘consumer’ if they are acquiring goods or services only if:

 

  • the amount of the goods or service does not exceed $40,000;
  • if the goods or services acquired is greater than $40,000, the goods or services are of the kind ordinarily acquired for personal, domestic or household use or consumption;
  • the goods are a vehicle or trailer which is principally used in the transport of goods on public roads.

 

Punishments for a person contravening bait advertising provisions

A person who is found to be contravening the s 35(1) provisions of the ACL, can face the following civil pecuniary penalties:

 

  • $1.1 million for a body corporate;
  • $220,000 for other persons.

 

The courts can also issue: undertakings; substantiation notices; public warning notices; infringement notices; injunctions; damages; compensatory orders; orders for non-party consumers; non-punitive orders; adverse publicity orders; orders disqualifying a person from managing a corporation; and orders for preservation of property.

A person in breach of the bait advertising provisions may also face criminal liabilities under s 157 of the ACL, with the maximum penalty of $1.1 million for a body corporate and $220,000 for any other person which can be imposed by the court.

Because of the potential detriment of bait advertising, s 157 does not consider intent when determining whether a person has committed an offence and is reflected in the Second Explanatory Memorandum, which states:

“The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.”

Contact Eddy Neumann Lawyers on (02) 9264 9933 or
by email info@eddyneumann.com.au for clear and expert advice.
You will be directed to one of our experienced lawyers who can assist your needs.

 

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