Baiting consumers might lead to a bite

The Office of Fair Trading (“OFT”) has recently imposed various undertakings on a company prominently advertising Apple iPhone 4s, despite only having 8 handsets available.

The OFT launched an investigation in to Marco Media, a company which had marketed that it had iPhone 4s available for sale at a heavily discounted price if consumers joined the “Groupola” website and signed up for daily updates from the website. The sale was heavily promoted across a range of media sources.

Consumers were not told that there were only 8 handsets available, so almost everyone who attempted to purchase the phones was left disappointed (having gone through the sign-up process on the website).

The OFT determined that the company had used bait advertising/pricing to lure the consumers to the website for a bargain when there was in fact very little opportunity that they would successfully obtain a phone. Bait advertising/pricing is prohibited under consumer protection legislation.

Other additional evidence against the company which led the OFT to take enforcement action included a progress bar confirming over half the iPhones were still available and that 202 had been bought by other customers, despite only 8 being available overall.

Ultimately, this case is a useful reminder of the range of obligations businesses must comply with when they are advertising and selling to consumers. Bait pricing is just one of the types of sales practices prohibited under consumer protection legislation.

Although in this case the OFT required undertakings from Marco Media, the OFT does have a full range of civil and criminal punitive measures at its disposal including fining companies in the most serious cases. Therefore the consequences of not complying with the appropriate legislation can be serious.

Written by Matthew Read, a Solicitor in the Nelsons Commerce and Technology group. To find out more about our Commerce & Technology group, click here.