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How is bait advertising illegal in Australia?

Monday, 6 August, 2018

It’s probably a gross understatement to suggest that we’re at that time of the year where many people are maxing out their credit cards and splurging on presents for loved ones.

Some of the more diligent people out there will probably have started their Christmas shopping already, whilst for others, the ‘adventure’ is about to begin. As the festive season is about to kick into gear, businesses will also be advertising their wares in line with the season, luring consumers in with the promise of a special deal, for that special someone. For the most part, the advertising will accurately reflect the product and price, however, there may be instances where an advertiser will put forward a product or service designed to get a customer into the store, but then attempt to lure the unsuspecting consumer to purchase another product which may be higher in price: this practice is known as bait advertising and is prohibited under the Australian Consumer Law (the ACL).

Bait advertising and the ACL

Firstly, s 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:
  • the nature of the market in which the person carries on the business; and
  • 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.

How will a person be found 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.

Who is a ‘consumer’ under the ACL?

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.

What are the punishments for a person found to be engaging in bait advertising?

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.”

Speak with one of our Gold Coast Lawyers to gain more information.