Common sense consumerism

Background

The case concerned several price-related claims and taglines that Bunnings has been using since 2002, including 'lowest prices are just the beginning', 'lowest price guaranteed', and 'lowest prices on all your DIY jobs'. In addition to these 'lowest prices' taglines, Bunnings also offers a well-known ‘lowest price guarantee’: “if you happen to find a lower price on the same stocked item [Bunnings will] beat it by 15%”.

In 2011, the Commerce Commission wrote to Bunnings with a warning that the 'lowest prices' taglines were in breach of the Fair Trading Act 1986 (FTA). Bunnings continued its 'lowest prices' taglines which led the Commerce Commission to investigate Bunnings’ practices in 2014.

Proceedings

Following the 2014 investigation which spanned almost 2 years (17 June 2014 – 28 February 2016), in December 2016 the Commerce Commission commenced proceedings involving 45 charges against Bunnings:

• Seven charges alleging that Bunnings had engaged in conduct liable to mislead members of the public in breach of section 10 of the FTA; and
• 38 charges alleging that Bunnings had made false or misleading representations as to the price of its goods in breach of section 13(g) of the FTA.

Notably, the Commission did not bring any charges under section 12A of the FTA which prohibits unsubstantiated representations.

The Commerce Commission proceedings alleged that through advertising at its stores and in campaigns on TV, radio and online, Bunnings gave an overall impression that it offered the lowest prices for its products, with only rare exceptions. The Commerce Commission did not consider this to be true.

As is often the case with proceedings brought under the FTA, the Court’s analysis was highly fact-specific, and each party presented considerable evidence.  

Decision

Finding that the Commerce Commission could not prove beyond a reasonable doubt that Bunnings had misled the public, the Court dismissed all charges against Bunnings. A copy of the decision is available here.

On the section 10 charges, the Court noted flaws in the Commission’s price comparison surveys, concluding that they were not “sufficiently robust and statistically reliable" to establish that Bunnings’ prices were not the lowest.

Had the Commerce Commission presented evidence of actual consumer confusion and/or evidence as to consumers’ interpretation of the ‘lowest prices’ taglines, the Court’s finding might have been different.

On the section 13 charges, the Court did not consider the ‘lowest price’ taglines to be representations within the meaning of the FTA and instead found that they were no more than “holistic statements of Bunnings' position in the market". The Court agreed with Bunnings’ expert evidence that the taglines would not, on their own, be taken literally by consumers to mean that Bunnings’ prices were in fact the lowest all of the time. That evidence proposed that consumers can be “trusted to use their common sense” and that consumers would “take into account the nature of the industry, the size of the stores, the number of SKU's and the general impossibility of ensuring that on each day every SKU in Bunnings stores was the lowest price”. In applying a degree of “robust realism”, the Court agreed.

Importantly, the remedial nature of the ‘lowest price guarantee’ offered by Bunnings to all customers was significant to the Court’s finding. Having knowledge of the well-advertised guarantee, consumers would accept there may be other retailers selling products sold by Bunnings for a lower price and would have the opportunity to ask Bunnings to honour an even lower price.

In the specific circumstances the Court considered that it would be acceptable for Bunnings’ prices to not be the lowest in approximately 15% of cases, provided that the ‘lowest price guarantee’ was available as a remedy in such cases.

Key takeaways

• FTA claims must be considered in the light of the specific facts.
• Consumer perception and/or confusion is crucial evidence.
• The Court appears to have adopted more holistic approach than the Commission, which has until now applied a fairly strict interpretation as regards pricing practices.
• Some leeway may be afforded to superlative or comparative price representations, but the amount of leeway will necessarily depend on the factual scenario.
• Consumers are not helpless, and their ability to “read between the lines in the light of their general knowledge and experience” is a relevant factor in determining a likelihood of confusion.  
• Businesses should ensure that where comparative price representations are made they have good systems in place to support these representations.