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Conduct: Bait Advertising Sydney NSW 2000 Australia

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ADVERTISING WITH CAUTION
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Advertising is crucial to the success of any business. It is important that
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your advertising practices do not fall foul of the requirements under the (entry off Horwood Place)
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Australian Consumer Law (ACL), including the requirement not to engage DX 8265 Parramatta
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in bait advertising.

This article outlines the importance of ensuring your advertising does not 1 3 1 L A W - client access
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amount to bait advertising. For proper legal advice, please telephone or info@consolidatedlawyers.com

email consolidated Lawyers to arrange an appointment about your specific CONSOLIDATED LAWYERS P/L ABN 74 125 262 526

circumstances.

WHAT IS BAIT ADVERTISING?

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Bait advertising usually occurs when a business either advertises or offers goods or services for
sale, with the knowledge that supply of the goods or services advertised cannot be achieved in a
reasonable quantity or in a reasonable amount of time. Section 35 of the Australian Consumer
Law prohibits a person from, in trade or commerce, advertising goods or services at a specified
price or quantity that may deceive the consumer.

Bait advertising is a prohibited form of advertising that deceptively lures potential customers to the
business. The customer is then deceived into engaging the business in some other, but usually
more expensive, way with the bait suddenly no longer being available.

ELEMENTS OF BAIT ADVERTISING

You can identify bait advertising when these elements are present in a business actions.

1. Advertising goods or services that are for sale.

2. Knowledge that advertised goods cannot be supplied to consumers in a reasonable

quantity or a reasonable amount of time. Knowledge such as this that will intentionally
mislead customers is an essential component of bait advertising and without intention;
you are merely making an honest mistake.

3. You cannot however be reckless as to the truth of your advertising.

AN EXAMPLE OF BAIT ADVERTISING

A car dealer advertises a Bistango Z3 at a very low price. The catch is that the dealer only has
one of these vehicles in stock. When interested consumers arrive, they are told the advertised
Bistango Z3 has been sold. The dealer then tries to sell the consumer a Bistango Z3 Sport at a
higher price.

Consolidated Lawyers Proud Business partner of Motor Traders Association of NSW

In this instance, the dealer may have misled consumers by advertising the sale when it knew that
it could not meet the likely demand.

Intention in bait advertising is inferred from the facts and circumstances.

WHY IS IT PROHIBITED?
The ACL has been in force since 1 January 2011 and regulates the operations and conduct of
businesses Australia-wide. The introduction of the ACL repealed the former Trade Practices Act
1974 (Cth) and the Fair Trading Act 1984 (NSW). The ACL governs, amongst other things, the
way that you advertise. Bait advertising is prohibited by the ACL.

The underlying intention of the Act is to assure consumers and business competitors that
businesses act in a fair and upfront manner when attempting to attract customers to purchase
their goods and services.

PENALTIES AND CONSEQUENCES OF NON-COMPLIANCE

If you are found to have been using bait advertising, as a corporation, you are liable to a
maximum penalty of $1.1 million per breach. An Infringement Notice without going to
Court is set at $6,600 per breach for private companies and $66,000 for listed
companies. These penalties are enforced by the Australian Competition and Consumer
Commission (ACCC). All that it will take is one disgruntled customer lodging a
complaint with either the ACCC or the Department of Fair Trading and your business
may be facing up to $1.1 million in penalties.

WAYS TO AVOID ENGAGING IN MISEADING OR DECEPTIVE

CONDUCT

In order to avoid breaches of the ACL provisions relating to the use of bait advertising, it
is important for businesses to ensure that the offers made through advertising and
promotional activities are in fact genuine and that all goods advertised are actually
available to customers.

Businesses must always take care to ensure that the goods and services they advertise
are the actual goods and services that they can provide the customer. It is important
that reasonable quantities to meet reasonable customer demand are available
throughout the advertising or promotional undertakings of the company.

Here are some simple practical ways that may assist your business in avoiding bait
advertising:

1. Do not advertise goods or services which you do not supply;

2. Keep a reasonable level of stock to ensure your supply meets the demand;

3. Limit the number of items per customer to ensure supply continuity;

4. If you run out of stock, order new stock immediately, or remove your
advertisements; and

5. If you have a particular quantity and model available, make that clear. For
example, 10 only of a particular model or specification level.

Consolidated Lawyers Proud Business partner of Motor Traders Association of NSW

For more timely and practical legal advice please call Mark Yum, lawyer on 02 9283
2566 for a free consultation.

Consolidated Lawyers Proud Business partner of Motor Traders Association of NSW