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Pricing mistakes on your products can be costly for your business. If you display the prices for your products online, this means that hundreds to thousands of people might see a mistake before you can fix it. Sometimes you may have to account for human error, but even if your system is automated there is the potential for malfunction. If there has been a pricing error, do you have to honour that price and sell your product at the lower value? This article will explain: 

  • whether you need to honour honest pricing mistakes; and 
  • when mistakes cross the line into misleading pricing.

Contracting With Your Customers

In its basic form, every contract with your customers has three steps:

  1. you offer your product at a certain price;
  2. your customer accepts that price; and
  3. your customer provides money in exchange for your product. 

The prices you display on your products are a part of your offer. If a customer sees the advertised price on a product on the shelf, they can reasonably expect that it will cost that price. If they get to the checkout and find that the product is a different price, however, you have not formed a contract with them. Therefore, you are not contractually obliged to honour that advertised price if it was an honest mistake.

However, if nobody caught the mistake at checkout and the customer completes the transaction, you cannot force them to pay the difference between the incorrect price and the correct price. But, if the honest mistake was an obvious one and the customer knew about it, then you may be able to.

For example, say a customer bought a t-shirt from you that was supposed to cost $30, but the displayed price said $20. As a result, the customer paid $20. You cannot force them to pay the extra $10 after the fact. But, if a customer bought a computer that was supposed to be $3000 but was obviously incorrectly priced at $300, then you may be able to ask them to pay the difference.

Honest Mistakes vs Misleading Pricing

Under your obligations as a business required by the Fair Trading Act, you cannot:

  • mislead or deceive your customers;
  • make false or misleading representations about your products;
  • engage in unfair sales tactics; or
  • make unsubstantiated claims about your products.

Pricing mistakes can count as misleading your customer. But, you likely would not be liable for a breach if you can prove that:

  • it was an honest or reasonable mistake; and 
  • you took all steps to ensure your prices were accurate.

You likely will not have to honour one-off pricing mistakes. But, making an honest mistake only goes so far as a defence. If you repeatedly or deliberately advertise or display your prices incorrectly, then you are breaking the law. If the misleading is serious enough, the Commerce Commission will investigate and impose severe fines. 

For example, say that you advertise a sale for your products, calling it your “biggest sale ever”. But, pricing errors across all of your products mean that they are significantly reduced to a value you did not intend to sell them at. Because of the number of products affected, and the nature of the advertising, you misled customers, and you may not be able to claim the error as an honest pricing mistake.

How Should My Business Handle Pricing Mistakes?

If there has been a pricing mistake on a product, correct it, and be upfront with your customers about the mistake. If you respond quickly, you can mitigate some of the fallout. You do not have to honour the error, but it may be good practice to do so. This is because doing so may help maintain customer goodwill. Alternatively, you could offer vouchers or store credit to make up for the mistake.

Review your business’ processes for pricing your products or services regularly, taking care to avoid potential mistakes. Even if your system is automated, keep an eye out for malfunctions and make sure your prices are up to date.

Pricing can become difficult with online sales, because of the nature of displaying prices online and the gap between the customer buying and receiving the products. To mitigate any potential issues with this process, you can:

  • put a clause in your terms and conditions that states you can cancel sales if there has been a pricing mistake; and
  • ensure that customers see these terms and conditions, adding them to the transaction process and making customers click a tick box saying “I agree” to progress further.

Key Takeaways

If you make an honest pricing mistake as a one-off, you do not have to honour that mistake. However, if you repeatedly or deliberately incorrectly price your products, you are misleading your customers. This is against the law. Take steps to review your business’ pricing system to avoid these kinds of mistakes, especially if you sell online. If you would like more information or guidance around pricing mistakes at your business, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Do retailers have to honour a pricing mistake?

The law does not require retailers to honour one-off pricing mistakes in most cases. If retailers repeatedly display incorrect prices, however, they could be liable under fair trading laws.

Do retailers have to display prices?

Retailers that are a member of GS1 New Zealand have to display their prices and not charge above that price. Most retailers that use computerised and barcode systems will be a member. However, non-members do not have to display or advertise their prices.

Do retailers have to honour a pricing mistake online?

Similar to physical sales, in most cases, online sellers would not have to honour one-off pricing mistakes in most cases. There is a grey area with online sales, however. If the mistake affected a large number of people, or customers entered into contracts because of an incorrect lower price, then there could be potential legal issues.

What happens if I buy a product at the wrong price?

If you buy a product that has been incorrectly priced, businesses cannot usually make you pay the difference between the correct price and the price you paid.

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