Strand has been fined $780,000 in the Auckland District Court for allegedly misleading consumers with its discounting and sales practices online and in-store.
Strandbags rebranded to Strand last week.
Commerce Commission Chair Anna Rawlings said Strand used numerous pricing strategies between 2018 and 2020, creating misleading impressions about the discounts available, or the ‘special’ nature of the price.
“[Strand] routinely advertised its products as if they were significantly discounted or being sold at special prices, which was not true,” Rawlings said.
“Our investigation found that some products had never been sold at the higher price from which a discount was said to be made, while others were on sale for so long, that the prices could no longer be said to be special.
“We found prices of certain products were artificially increased prior to the sale, in order to make the discount seem more significant. Other products had been repeatedly discounted, but only ever referring to the very original ticket price as a comparison, despite being sold at different, lower, prices since.”
The discounting practices were liable to mislead consumers into thinking a greater saving was on offer than was really the case, which in the Commission’s view, created a false sense of urgency.
In the Auckland District Court, Judge Ryan concluded that price inflation and immediate discounting was deliberate, and that extended and repeated discounting was “significantly” or “highly” careless, bordering on reckless.
Judge Ryan also agreed with the Commission that breaching the Fair Trading Act was integral to Strandbags profitability.
Rawlings said that the case serves as a reminder to businesses to ensure that the bargains being offered to consumers are genuine, unambiguous and not promoted in a way that entices consumers to make a purchase believing it offers a better discount than it really does.
“Consumers deserve to get the deal that they think they are getting. With Black Friday and Christmas around the corner we are urging businesses to review their processes and the deals on offer.
“When making a promotional claim, think about the overall impression that consumers might take away from it, and whether this differs from what you’re actually offering.”
Rawlings also encourages consumers to shop around and do their research before rushing into a purchasing decision this year.
“Just because one store is offering a discount, does not mean you won’t get a better price elsewhere. Get an idea of the price you could usually expect to pay for something and then satisfy yourself that the saving you are offered is genuine.”
The Commission has provided resources for consumers and businesses on its website, including a video about pricing and a price promotion tip sheet for retailers.
Background
Strand is an Australasian wide retailer of handbags, wallets, luggage, backpacks and business bags.
It has 26 retail stores in New Zealand and also conducts website sales. Strandbags routinely advertised products on ‘sale’ or promotion using comparative pricing, for example:
- was/now pricing, eg “was $289 NOW $144.50”
- strikethrough pricing, where a higher price was struck out and replaced with a lower one, eg "$349.00 $174.00”
- percentage discount claims, eg “40% OFF”
savings amount claims, eg “Save $50”.
Judge Ryan took a starting point of $1.2 million, and applied discounts for co-operation, lack of previous offending and early guilty pleas, which resulted in an end-sentence of $780,000.