Former jewellery chain operator convicted for advertising false discounts

The Federal Court has convicted the previous owner of jewellery chain Zamel’s for making false representations about the size of discounts advertised in its 2005 Christmas catalogue.

Ascot Four, which sold Zamel’s to a new operator in March 2007, was charged by the Commonwealth Director of Public Prosecutions in December 2006 after the Australian Competition and Consumer Commission launched an investigation into Zamel’s Christmas 2005 catalogue, which was distributed to 2.6 million people in South Australia, the ACT, Victoria, Western Australia and Tasmania.

The focus of the investigation was 11 jewellery items in the catalogue. Each of the items featured a sale price next to a strike-through price. For example, a 10.5mm bolt ring bracelet at a price of $745 was pictured with a strike-through price of $1675.

But the court found Ascot Four falsely represented that it had sold each of the 11 items at the strike-through price within a reasonable time before the sale period.

This represented a breach of the section of the Trade Practices Act that prohibits false or misleading representations being made in relation to the price of goods.

Justice Mansfield of the Federal Court specifically noted that: “Having regard to the previous sales of each of the 11 jewellery items, the purchase of any of those 11 items during the sale period would not result in a saving to the purchaser of the difference between the sale price and the strike-through price. In no case had the defendant sold any of those items… at anywhere near the strike-through price.”

ACCC chairman Graeme Samuel said the case showed the companies need to be careful when using comparison price advertising.

“This conviction shows that advertised discounts must be real and not illusory. If you make a was/now price comparison or use a strike-through price, you must have genuinely offered the product at the ‘was’ or strike through price for a reasonable period immediately before the sale promotion.”

A further hearing will occur on a date to be fixed for the purpose of considering what, if any, further orders should be made.

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