A former rent-a-car operator has been fined $30,000 for misleading advertising, following action by the Australian Competition and Consumer Commission.
Nonchalant, the former operators of Abel Rent a Car in Brisbane, was found in the Federal Court to have misled consumers by making them pay more than the quoted price online for car rental costs.
ACCC investigations revealed the Abel Rent a Car website advertised vehicles for hire at a daily rate of $35 per day, but extra mandatory fees including $5 a day for a “vehicle registration recovery fee” and 7.5% “administration fee” meant renters actually paid $43.54 a day.
The ACCC launched action against Nonchalant in January this year, even though in December last year the company collapsed with debts of around $440,000.
An ACCC spokesperson was quoted in the Courier Mail as saying it pursued the case anyway because it would be a “strong deterrent for other businesses” and it would dissuade directors from liquidating companies and resurfacing “phoenix” operations.
SmartCompany contacted the ACCC, but received no response prior to publication.
Hall and Wilcox partner Sally Scott told SmartCompany by advertising the wrong prices, Nonchalant disadvantaged the competition.
“Businesses need to compete with other businesses in their industry. If competitors are advertising using prices which exclude add-ons, then a business will struggle commercially if it advertises using prices that include add-ons.
“In a commercial sense, a business that advertises price can’t compete unless it advertises on the same terms as its competitors,” she says.
Scott says by not including the compulsory extra fees, businesses run the risk of misleading consumers.
“The test is whether consumers would read a price as being the total price or whether they would ordinarily know or expect that there would be add-ons.
“Businesses need to make a decision on this legal risk without reference to what their competitors are doing,” she says.
Scott says businesses can get caught for misleading advertising, even if its competitors are doing the same thing.
“It is no answer to a misleading conduct claim to simply say all other businesses are doing the same thing. If it’s misleading, it’s misleading. All businesses could be caught.
“However, what other businesses are doing can be relevant to how consumers read an advertisement. It can be relevant to whether consumers would ordinarily expect a price to include or exclude add-ons,” she says.
When assessing whether or not an advertisement is misleading, it comes down to how the consumer interprets it.
In her judgment, Justice Gordon found the disclosure of additional fees and charges on subsequent web pages during booking did not negate the misleading representations.
Scott says this conduct has been prevalent throughout a number of industries including car hire, home building and flights.
“If a business finds itself in an industry where competitors are using misleading prices, then rather than join in the misleading conduct, businesses would be better advertising on a different basis, such as without prices. Businesses should think outside the square,” she says.