For small businesses, running sales and offering discounts can be especially useful for attracting customers and boosting revenue. But while offering discounts can be great for business, it’s essential to ensure your sale prices are genuine and can be substantiated, otherwise you risk breaching Australian Consumer Law (ACL). In this article, we look at some tips for running compliant and credible sales promotions.
What are Substantiated Sales?
A substantiated sale refers to a promotion where the advertised discount is based on a legitimate and verifiable original price. Under the ACL, misleading price representations can be considered deceptive conduct. This can result in penalties, reputational damage, and loss of consumer trust.
Ensuring Your Sales are Substantiated
Here are a few rules of thumb for setting your sale prices.
- The sale price must be genuinely discounted.
You cannot advertise a “sale” if the discounted price is actually your regular selling price. This is considered misleading and deceptive conduct under the ACL. - The original price must have been charged for a “reasonable” period.
The ACL prevents businesses from marking up a product for a few days in order to present a ‘discount’. This also includes charging a higher price for a handful of units before discounting. The original price must reflect what you genuinely charged for a reasonable time across all goods or services of that type. - Recommended Retail Price (RRP) comparisons must be accurate.
Even if other businesses sell at the RRP, you must have sold the product at that price for a reasonable period before using it as a comparison. Otherwise, referencing the RRP could mislead consumers and breach the ACL. - Ensure the ‘original price’ is correct.
Double-check that the price you’re comparing against is accurate and reflects your actual pricing history. Misstating the original price can be considered deceptive, even when done by accident! - Sales must be time-limited.
A sale should run for a clearly defined and limited period. If a product remains discounted for an extended time, it may be considered the new regular price. Advertising it as a “temporary sale” in such cases could mislead consumers.
Why Compliance Matters
Startups often operate with limited resources, and a breach of consumer law can be costly, both financially and in terms of brand reputation. The Australian Competition and Consumer Commission (ACCC) actively monitors pricing practices, and penalties for misleading conduct can include fines, enforceable undertakings, and public warnings.
Beyond legal risk, misleading sales tactics can erode consumer trust. Building a reputation for honesty and transparency is far more valuable in the long run.
What Next?
Sales promotions can be powerful tools for growth, but they must be executed with integrity and in line with the ACL. By ensuring your sales and discounts are genuine and substantiated, you not only avoid legal pitfalls, but you build a business that customers respect and return to.
For help with the legal compliance of your advertisements, contact us for a free, no-obligation chat.
