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Your customers have consumer rights. Consumer law regulates how you can interact with your customers and provide certain quality standards for your products. An important aspect of consumer law is how it regulates pricing and how this affects your business. If you mislead your customers about your pricing, you could face hefty legal penalties. This article will provide some guidance on the relevant consumer law and how it affects how you can price your goods.

New Zealand Consumer Law

Two pieces of consumer law affect how you price your goods. These are the:

Fair Trading Act

The FTA covers what you can say to your customers and how you should sell your products fairly. In particular, the Act prohibits:

  • misleading or deceiving your customers;
  • making unsubstantiated claims about your products;
  • engaging in unfair sales tactics, such as bait advertising or pyramid selling; and
  • making misleading or deceptive claims about your products.

There are also certain product safety standards you must comply with. You must accurately represent your products and disclose all relevant information, which also applies to pricing. This law aims to improve consumer protection, particularly against businesses engaging in deceptive conduct.

Consumer Guarantees Act

To meet your obligations under this law, you need to uphold the consumer guarantees it imposes on your products. These cover a variety of guarantees, including pricing. 

If you are in the process of selling a product to a customer, and there is no already agreed-upon price, then you must price that product reasonably. You should base this on what other traders charge for similar products.

For example, a customer may commission you to create a particular product for them, such as a custom-made jacket. When you do not agree on a price beforehand, you must sell it at a reasonable price when they purchase the final product.

Pricing Your Goods

You have the legal right to set your own prices for the goods you sell. If you use a supplier, they can recommend a price to sell the goods they supply (known as a recommended retail price or RRP). However, you get to make the final decision about what you charge for your goods. The law only applies where you mislead your customers about those prices or engage in certain anti-competitive conduct.

For example, price gouging is not illegal in NZ. This refers to the practice of raising prices to a much higher level than what you charged previously. However, customers will not appreciate this practice, and you need to be able to provide a legitimate reason for this price raise if a customer asks you why. If you lie, then you could be breaching your FTA obligations.

How the FTA Affects Your Pricing

The FTA affects your products’ prices as far as it requires that you do not mislead customers about those prices. They should be clear and accurate and relay any important information. You need to detail: 

  • whether you include GST in the total price; and
  • any extra fees or surcharges.

This is particularly important in your advertising. If you advertise that you sell furniture at a total price of $99 per piece, but this number does not include GST or delivery fees, this may qualify as misleading pricing. Even if you put a disclaimer or outline your extra fees in the fine print of an advertisement, you could face financial penalties under the FTA if the overall image is misleading.

Discounts

This same reasoning applies to the claims you make about any discounts or sales you hold at your business. You will likely compare a discounted price to the “usual” or “everyday” price that you sell your goods at. You need to make sure that this claim about a usual price is actually valid. Such a claim would be misleading if you:

  • never sold your goods at that usual price;
  • deliberately increase the usual price to make the discounted price seem like more of a deal;
  • charge various different prices for that product, and the usual price is just one of them; and
  • have not sold at this usual price for a long time, or you only rarely use it.

For example, suppose you have a sale for your clothing goods, claiming that they are all 40-50% off usual retail prices. However, if you have regularly offered those same discounted prices before or that sale, you are misleading your customers because there is no actual discount.

Tip: In some cases, pricing errors may count as misleading pricing, so make sure you are diligent in remedying pricing mistakes.

Key Takeaways

If you mislead your customers about your goods when you price them, you could breach your consumer law obligations. This includes misleading pricing and deceiving your customers about the nature of your sales or discounts. If you would like more information or help with your business’ pricing practices, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Does the Fair Trading Act apply to pricing?

The Fair Trading Act prohibits misleading claims or conduct, which includes misleading pricing. This means that it is against the law to deceive your customers about the true price of a product.

When is a price misleading?

A price is misleading if the displayed price is not the true price. For example, if the price you display is not the total price that includes extra fees or surcharges.

What is price gouging?

Price gouging refers to the practice where a business may offer a product at one price, and then a short time later offer it a significantly increased price. This is not illegal in NZ, but if you mislead customers about the reason for a price increase, then you may be liable.

What does RRP mean?

RRP stands for recommended retail price. This is the price a supplier may recommend resellers or retailers sell their supplied goods at.

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