What is Bait Advertising and When is it Illegal?
This article explores bait advertising and whether all forms of this advertising technique are illegal under Australian Consumer Laws.
What is Bait Advertising?
According to the Australian Competition and Consumer Commission (ACCC), bait advertising is the offering of items at low prices. Bait advertising is a great way to attract consumers to your business. Bait advertising is a popular form of conduct during a sale. Now, bait advertising can be a great legal way to advertise your products and services to gain a consumers attention. So, engaging in this advertising technique is not itself a beach of Australian Consumer Law.
However, there are times where this type of advertising can be illegal. Of course, it depends on the type and circumstances of the conduct. The rules surrounding bait advertising are provided for in section 35 of the Australian Consumer Law. This section states that bait advertising can be illegal when the goods or service advertised is not available in reasonable quantities, for a reasonable period of time. If a business or seller engages in this prohibited version of advertising, they may be engaging in misleading or deceptive conduct.
Who is a ‘Consumer’?
For the purposes of the bait advertising laws, the consumer can be the individual to bring a claim against the seller. The consumers claim concerning a businesses bait or misleading advertising will be regarded as a misleading and deceptive conduct claim. Accordingly, a consumer is a person:
- Who purchases a good or service not exceeding $100,000 or,
- Who buys goods or services of a kind normally acquired for personal, domestic, household use or consumption.
Lee owns an electronics store and advertises a “week-long SALE” on all televisions. Lee usually sells around 20 television per week. Consumers were excited and they flooded to Lee’s store. The sale was over after a few hours. Lee’s consumers became curious as to how many televisions he had in stock for the sale to end so abruptly. Lee told one of his consumers he only had 3 televisions in stock for the sale. Some consumers became furious when the news spread and decided to report Lee’s misleading conduct to the ACCC. The ACCC found that Lee should have been clear in his advertising that he had “limited stock available”. The ACCC also stated that the period of 1 week for a 3 item sale was far beyond a reasonable time.
Lee had engaged in bait advertising.
How to Legally engage in Bait Advertising
As stated above, bait advertising itself is not illegal. However, the Australian Consumer Law places an obligation on businesses to refrain from engaging in this misleading or deceptive form of advertising. This obligation reminds businesses that their advertising must be reasonable. This involves being clear, honest and upfront with your consumers about the amount of stock available in the sale. This also involves ensuring that the sale only runs for a reasonable period of time. In general, the reasonable period of time will correlate to the amount of stock available, and the popularly of the product.
As a result, having terms and conditions in your advertisements can be are extremely important. Accordingly, when only limited stock is available in a businesses sale, simply state “limited stock is available” or “while stocks last”. This ensures that consumers are aware that there is a small amount of stock, which may run out quickly. Therefore, when businesses are upfront and clear in their advertising, it is unlikely that illegal bait advertising will be breached.
If you usually engage an advertising agency to take care of your businesses advertising needs, it is important to have an Advertising Agreement in place. An advertising agreement can protect your business from the baiting mistakes of the advertising agency your company has engaged.
Consequences of Bait Advertising
If a business engages in an illegal form of bait advertising, it will amount to misleading or deceptive conduct. Engaging in conduct that is misleading or deceptive can have extremely severe consequences on businesses and individuals. Even if you engage in bait advertising by accident, you may still be guilty of breaching misleading and deceptive conduct provisions.
Accordingly, the maximum penalty for misleading or deceptive conduct is $500,000 for an individual. However, for body corporates, they can be charged either $10 million, 3 times the benefit received from the conduct or 10% of their annual turnover. A body corporate will be charged with the highest amount out of the 3 penalty options.
Bait advertising is a great way to attract consumers. However, it is important that you do not engage in any misleading or deceptive conduct. The fines that are attached to this form of misleading advertising are extensive and should work as a strong deterrent. If you wish to advertise your goods or services, it may be best to speak to one of our Consultants to ensure your actions are reasonable and legal.
Mai is a Digital Marketing Coordinator at Lawpath, working as part of the Content Team. She is in her final year of a Bachelor of Laws degree at the University of Wollongong. She is interested in Business Law and Employment Law.