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ACCC picks on jewellery retailers?

Running any form of retail business these days is tough, and it can be made all the more difficult by government legislation. COLEBY NICHOLSON asks; is the ACCC unfairly targeting jewellery retailers?
There are many who believe the Australian Competition and Consumer Commission (ACCC) is unfairly targeting jewellery retailers. They claim the recent Zamel’s case is proof that the corporate watchdog has been gunning for bricks-and-mortar retailers while online retailers can do almost anything and get away with it.

It is easy to see how one might conclude that traditional (bricks-and-mortar) retailers are being unfairly treated, and that there seems to be one set of laws for them and another set for online businesses, especially when it comes to discounting. 

Indeed, it might even appear that TV shopping has another set of laws again while, all along, traditional retailers are being hung out to dry. 

The matter is made worse when one considers that local stores must charge a goods and services tax (GST) on all purchases but consumers can buy from an overseas online business and not be charged GST. Add to this the separate issue of ever-increasing rent hikes and other ”tenancy costs” imposed upon retailers by shopping centre landlords and you might begin to see why many believe the playing field isn't level. 

The legitimacy of two-price discount advertising (”was/now” advertising) has always been contentious but it became far more so when Zamel’s was found guilty in August 2012 of misleading consumers. Zamel’s subsequently appealed but it was dismissed late last year and the original $250,000 penalty remained. 

The Federal Court’s decision is said to be far reaching and the detailed judgment could be described as case law – a landmark decision that may be used as a standard when dealing with similar instances. Although the decision deals with jewellery, it’s believed to have far wider ramifications across the whole retail sector.

Unfortunately for Zamel’s, it’s not the first time the retailer has been caught misleading the public with false advertising, although the previous judgement was brought against the original owners in 2006. 

Zamel’s is also not the only jeweller to have fallen foul of the ACCC. Prouds Jewellers, the largest retail chain in the country, lost a similar case in 2008 over its use of “was/now” advertising, adding to the perception that the ACCC is targeting jewellery retailers. 

I won’t revisit these complex cases here but I will make two points. While all businesses have a legitimate need to discount products and services from time-to-time, there can be no excuse for misleading consumers. No retailer should set out to present savings that are either inaccurate or non-existent, and those who can be shown to be breaching Australian Consumer law should be prosecuted, as has Prouds and Zamel’s.

Having said that, the issue is very complex: how do you accurately communicate savings to consumers if not by showing the ”normal” prices? To that effect, what is a normal price anyway? 

For example, how long must an item be on offer at the normal (was) price before it can be marked down to the discounted (now) price, and must any of those items be sold at the normal price first? If so, how many must have been sold at the higher price before it can be marked down?

The Zamel’s case shed new light and clarified many issues in this area; however, the Court’s judgment has also made the matter more complex and didn’t offer answers to some important questions. So much so that the Jewellers Association of Australia (JAA) – which has its own Code of Practice and which sets the bar higher – has been closely monitoring the recent judgement. 

What about online retailers?
Going back to the beginning, much of the ACCC’s energy and effort has been directed at traditional retailers, but what about their online competitors? After our recent reporting of the recent Zamel’s case and its appeal, I received many calls and emails about the advertising and marketing tactics of internet sellers. 

The common question was how come ”such and such” website can do this? Just a cursory glance at some of the examples would suggest to the uninitiated that there are worse sales practices being perpetrated by online retailers than those for which Zamel’s was prosecuted.

For example, many online retailers are aggressively advertising discounted prices on products that they have never previously stocked, let alone sold to consumers. Therefore, many people have asked, if you have never actually stocked a product, you could never have sold it at the higher price, so how can you advertise a “was/now” discount?

Zamel’s and Prouds at least had the products in store when they were advertised at a discount. Has the ACCC missed the fact that some of these online retailers have never actually stocked the product, let alone sold it at any other price than the “now” price?

Other aggressive advertising practices being used by some online retailers, especially those “daily deal” websites, include displaying US prices alongside their discounted Australian prices in order to present savings to consumers. 

I would suggest that the online retailer only advertises that way when the exchange rate is favourable. That is, currency fluctuations can be “wild” at times and the average consumer would not necessarily take these things into account and may not know that the old, overseas stock being advertised may have been much cheaper at a previous date. 

I wonder what the ACCC would do if high-profile bricks-and-mortar stores suddenly started displaying US prices in their windows to portray savings to consumers?

Traditional retailers not only have to contend with worldwide competition from internet retailers these days; aggressive price discounting practices occur in other retail channels also. 

For some time, TV shopping networks have advertised jewellery with a saving while advising viewers at the same time of the exclusiveness of said products – these items have also never been sold at a higher price and yet the viewer is being presented with a “was/now” price, so how come the ACCC hasn't knocked on the door of the TV networks? 

What about auction websites that advertise jewellery using the term “Under instructions from...”? This implies that the jewellery is being sold after a business has been closed and its stock liquidated when, in actual fact, the jewellery is the auction website's own brand!

I could also mention my old ”hobby horse” – the practice of selling new jewellery and watches with valuation certificates. That is still rampant on some websites.

There are many more online examples that would appear to be misleading and deceptive, and maybe it’s time for the ACCC to be seen to be levelling the playing field if, indeed, it isn’t level now. 

That is, there may be good reasons why all of these practices are not illegal and the only businesses breaking the law are these “terrible” bricks-and-mortar stores, which is why they are being targeted. 

Do you seriously believe that? 

Update - Jewellery stores unite
Since first writing this commentary the JAA called a meeting of its members to discuss two-price advertising and the ramifications of the Zamel’s judgement. All major jewellery chains were invited, including non-JAA members, which meant more than 1,800 jewellery stores were represented at the meeting last month. 

Josh Simons from the JAA’s legal firm Thomsons Lawyers summarised the outcomes from the six judgements since 2008 in the various ACCC actions and appeals involving Prouds, the Ascot Four (first Zamel’s case) and Zamel’s. 

In addition, Colin Pocklington, chair of the JAA’s Industry Code of Practice, explained how the code had been updated to accommodate the most recent court decision. He explained how the guidelines could assist jewellers to implement advertising practices that will meet consumer law requirements, and achieve best practice. 
The meeting was reportedly a great success but it won’t deal with the larger issue – even if all jewellers comply with the law, and even if most adopt the higher standard of the JAA’s code, it doesn’t rectify the issue of unscrupulous online practices. 

I doubt that the ACCC is going to sit there and specifically monitor all online retailers that sell jewellery and watches so, in order to ensure a level playing field, the JAA might have to resort to aggressively monitoring online retailers with the view of assisting the ACCC to investigate perceived breaches of the law. After all, the ACCC generally doesn’t act unless there is a complaint. 

That is not to say all online retailers are misleading consumers but looking at some of the ads, disclaimer wording and product on these websites, there must be some questions asked about the so-called "savings" to consumers. 

The JAA, as the peak industry body, must step forward on this issue; however, local suppliers also need to step up to the plate. No reasonable person begrudges competition in the market, but if local bricks-and-mortar retailers are being harmed it goes without saying that the suppliers are exposed also and they must take a proactive stance too if they want a vibrant and resilient traditional retail channel of independent jewellers and chain stores. 

In other words, both sides of the industry must unite to assist the government watchdog to ensure a level playing field.

Confusing industry messages
Mind you, the concept of a united front might not be helped by industry magazine Jewellery World. For some time its website has featured highly-prominent advertisements from online businesses that promote aggressive discounting, some offering "80 per cent off" designer brands.

Just as our own magazine Jeweller is meant to represent the local jewellery industry and, wherever possible, support independent retailers operating traditional jewellery stores, it is somewhat curious that an industry magazine like Jewellery World would be seen to be assisting these online competitors by openly promoting their businesses in disregard of traditional jewellery stores.

While Jewellery World's own practices are not illegal, I mention them to not only demonstrate that traditional family-run jewellery stores already have their hands full contending with internet sellers to have to also worry about unhelpful behaviour from an industry stakeholder! 

Click on any of these ads and you will be directed to internet businesses selling jewellery and watches at heavily discounted prices, thereby steering buyers away from traditional jewellery stores and, consequently, local wholesalers and Australian suppliers.

Indeed, a number of local companies distributing international watch and jewellery brands in Australia and New Zealand have been left scratching their heads as to why an industry publication would promote sales of their product away from the local supply channel and towards online businesses - including overseas businesses - that compete with local suppliers and retailers who are carrying the same product.

That issue aside, the JAA’s meeting was certainly a step in the right direction to ensure bricks-and-mortar retailers understand and comply with the law; however, the JAA along with all industry participants (trade media included) may need to lead the charge and help the ACCC investigate online competitors. Not only should there be one law for everyone, it should be seen as such. 

Without a healthy jewellery industry, and without a firm base of independent jewellers and suppliers, there is no need for the JAA and, unsurprisingly, no need for industry magazines either!

More reading

Online retailer examples

NOTE: Communicating discounts to consumers is not an easy task as some of these website images indicate. Jeweller in no way alleges that any of these businesses are in breach of Australian Consumer Law. The examples are presented to illustrate the difficulties in advertising and explaining price savings to consumers especially where the discounts include foreign currency calculations; product that has not previously been available in Australia and/or the seller has not previously sold the product. 

Jewellery World’s website featuring ads from online retailers promoting heavily discounted product in competition with traditional jewellery stores and local suppliers.
Jewellery World’s website featuring ads from online retailers promoting heavily discounted product in competition with traditional jewellery stores and local suppliers.

Coleby Nicholson

Former Publisher • Jeweller Magazine

Coleby Nicholson launched Jeweller in 1996 and was also publisher and managing editor from 2006 to 2019. He has covered the jewellery industry for more than 20 years and specialises in business-to-business aspects of the industry.

SAMS Group Australia

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