Court dismisses Commerce Commission case against Bunnings

The Commerce Commission’s case against Bunnings alleging misleading representations that it offered the lowest prices in the market has been dismissed by the Auckland District Court.

The Commission alleged that Bunnings’ advertising at its stores nationwide, along with advertising campaigns on television, radio, online, and in newspapers and catalogues, gave an overall impression that it offered the lowest prices for its products, with only rare exceptions, when the Commission considered this was not true. Advertising included phrases such as ‘lowest prices are just the beginning’, ‘lowest price guaranteed’, ‘lowest prices on all your DIY jobs’ and ‘unbeatable prices’.

The representations were accompanied by Bunnings’ lowest price guarantee. The lowest price guarantee provided that if customers “happen to find a lower price on the same stocked item” elsewhere then Bunnings would beat its competitor’s price by 15%.

The Commission’s investigation focused on the period 17 June 2014 to 28 February 2016. Proceedings were commenced in December 2016.

His Honour Judge BA Gibson found that the Commission failed to prove the charges beyond reasonable doubt.

The Judge concluded that “Consumers would … consider the [lowest price guarantee] alerted them to the possibility that not every item in Bunnings may be the lowest price but providing [sic] a remedy to achieve that.”

His Honour also found that consumers would be aware of the vast range stocked by Bunnings and its competitors and realise that Bunnings could not always be the lowest price.

In that context, his Honour found that it would be acceptable if Bunnings’ price was the lowest around 85% of the time provided the lowest price guarantee was available to ensure consumers could obtain the lowest price from Bunnings.

Commission Chair Anna Rawlings said, “Many consumers are strongly motivated by price when making purchasing decisions. The Court hasn’t found in our favour in this instance. However, the judgment provides some important clarification of the law relating to the use of broad marketing statements that include concepts such as ‘lowest’ prices.”

Judge Gibson concluded that it is the overall impression created that counts. He said that businesses cannot rely on literal interpretations of representations they make. They must consider how a consumer would interpret advertising “in light of his general knowledge and experience in worldly affairs”.

“In acknowledging the outcome of this case, the Commission would like to remind businesses that they must consider how consumers are likely to interpret what they are told about goods and services, their prices and available savings,” said Ms Rawlings.

“Not only must they take care not to mislead consumers, but a recent law change also makes clear that they must have reasonable grounds for making representations at the time the representations are made. While we have been unsuccessful in this case, it reinforces the importance of having good systems in place to support any comparative price representations – systems that enable traders to take account of changes in the information underlying their price comparisons and respond accordingly.

“For consumers, this judgment also highlights the importance of shopping around to satisfy themselves that they are getting the deal they expect, and taking up price matching guarantees if they find that they apply to them,” said Ms Rawlings.

A full version of the judgment can be found on the case register on our website.

Background

Lowest price guarantee

The wording of the lowest price guarantee was:

If you happen to find a lower price on the same stocked item, we’ll beat it by 15%*.

* Excludes trade quotes stock liquidations and commercial quantities.

Misleading conduct in relation to goods

No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.

False or misleading representation

No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of good or services make a false or misleading representation with respect to price of any goods or services.

Substantiation

A representation is unsubstantiated if the person making the representation does not, when the representation is made, have reasonable grounds for the representation, irrespective of whether the representation is false or misleading.

Other cases

Recent price-related cases taken by the Commission include:

Bike Barn was fined $800,000 for misleading pricing (February 2017)

Online mobile phone store Buy Mobile was warned over its price discount claims (August

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