Influence: Consumer laws - deceptive and misleading advertisement, price discrimination, implied conditions, warranties Flashcards
Influences
Context of consumer laws
In 2011, the Australian Consumer Law (ACL) was introduced as a national consumer protection law. It aims to safeguard Australian consumers from unfair business practices and applies to all businesses selling goods and services to consumers. Non-compliance with the ACL can result in orders for changes and fines by the ACCC. The Competition and Consumer Act 2010 also aims to protect consumers from deceptive practices and promote competition in the marketplace. The law is enforced by the ACCC, state consumer agencies, and ASIC for financial services.
Deceptive and misleading conduct
Even though the Competition and Consumer Act 2010 (CCA) makes deceptive or misleading advertising illegal, a number of methods are still used by some businesses. Examples of deceptive and misleading advertising under the CCA include:
Fine print
Important conditions are written in a small-sized print and are therefore difficult to read.
Before and after
Consumers may be misled by ‘before’ and ‘after’ advertisements, where the comparison is distorted so that ‘before’ images are worsened and ‘after’ images enhanced.
Special offer
Advertisements may be misleading or deceptive if they imply that a special offer is available for only a limited period, when in fact the offer is continuously available.
Bait and switch
This involves advertising a few products at reduced prices and, therefore, enticing prices to attract customers. When the advertised products quickly run out, customers are directed to higher priced items.
Price discrimination & case study
Price discrimination is the setting of different prices for a product in separate markets. The Australian Consumer Law (ACL) prohibits price discrimination if it can be proven to substantially reduce competition in a market. It only applies to suppliers of products and does not extend to resellers/retailers who can determine their own selling prices.
Price discrimination is legal in some circumstances. For example, if differences exist in the cost of getting the product to different markets and if there are slight differences in the product itself. For example, prices in regional areas may be higher if the cost of transportation is greater, in order to get it to the customer.
This prohibition not only applies to prices, but also applies to situations where a company provides discounts, credits, rebates, services and better payment arrangements. This means that a business cannot give favoured treatment to some customers while denying it to others.
Case Study
IKEA performs ‘dynamic pricing’; they price their products depending on market conditions, influenced by factors such as geographic location, level of competition and labour costs.
IKEA for Business memberships offer free expert advice from dedicated business specialists and benefits including remote ordering, easy payment options and invoicing, setting up an IKEA for Business account.
Implied conditions & case study
Implied conditions are the unspoken and unwritten terms of a contract. These conditions are assumed to exist regardless of whether they were especially mentioned or written into a contract.
The most important implied term relating to customer purchases refers to the product’s acceptable quality. A product is of acceptable quality if it is fit for the purpose for which it is being sold, acceptable in appearance and finish, free from defects, safe, and durable.
CASE STUDY
IKEA has a duty of care (legal obligation under the ACL) to inform customers of products that do not perform their intended function. IKEA release around 2, 500 new products worldwide each year and on average, make 3-6 product recalls each year e.g. IKEA furniture recalled over fears it could collapse and cause injury | 7NEWS
Warranties & case study
A warranty is a promise by the business to repair or replace faulty products. In recent years, government legislation has made it necessary for businesses to state, clearly and simply, the terms and conditions of the warranty.
A warranty assures the customer that the business has confidence in the quality of its product and will repair or replace any faulty items.
False or misleading statements concerning the existence, exclusion or certain conditions of the warranty are prohibited under ACL.
Ikea
At Ikea every product goes through rigorous quality control checks. E.g. Ikea created a machine to ensure the durability of the couches as over 10 years a sofa on average is sat on 50,000 times. Pushed 130 weights in the seat over 3 weeks to ensure the frame is stable. For this reason IKEA can offer a ten year guarantee
