Brushing Up On The Rules Around Sales Practices

Think you know all there is to know about the rules for price promotion, referral selling and other sales practices? Hopefully, you’re across all your legal requirements and are fully compliant, but it wouldn’t hurt to brush up on the rules for sales practices under the Australian Consumer Law. This article provides an overview of some of the requirements, with details at the end for where to get more comprehensive information.

Price Promotions

When promoting a price to your customers you must promote the total minimum price that a customer would need to pay to purchase the product or service from you. This applies to all price promotions and statements, including in an advertisement, onsite at your business premises, on social media, or your website.

Optional extras don’t usually need to be included in the single (total) price. For example, a vehicle dealer wouldn’t need to include paint protection, rust proofing, fabric protection or window tinting in the single price if the consumer can choose whether to pay the extra cost for these items. However, if an optional extra is shown in an advertisement, you must include the price for the optional extra in the single price, to avoid potentially misleading consumers about the products or services that are actually included in the sale for that price.

The rules around delivery charges depend on the type of product being offered for sale. As a general rule, ‘dealer delivery’ fees in the motor vehicle industry are considered a component of the single price and must therefore be included in the total price communicated to customers. However, for other products - such as car parts or car care kits - the amount of the delivery fee doesn’t need to be included in the single price unless you’re aware of a minimum charge that must be paid. If delivery charges will apply, you must make this clear to your customers regardless of whether the exact amount of the delivery cost is known at the time of purchase.

Amounts a consumer must pay directly to a relevant authority – e.g. for vehicle registration – don’t need to be included in the single price.

Referral selling

Many businesses try to increase sales by encouraging customers to refer their friends. Referral offers can be legal, but only when the rules are followed.

The law allows you to offer your existing customers a reward - such as a credit or free product, if they get a friend to make a purchase via a referral link.

If it’s contact details for new potential customers, that you’re after, you can offer a customer an incentive to provide details of their friends. The incentive might be a discount or free service. If your customer does provide contact details of another person, you must provide the incentive as promised to the customer, even if their friend does not purchase from you. It’s illegal for a referral reward to be dependent on a successful sale to another person.

Avoid pressuring customers

There’s a big difference between being a highly motivated salesperson and harassing customers into making a purchase. Consumers dislike feeling pressured into buying a product or additional products and services like finance, insurance or extra warranties. But also importantly, it would be an offence to intimidate or wear down a customer to the point where they feel they have no choice but to agree to buy.

It's best to simply present customers with the options offered by your business or related suppliers and outline the potential benefits, then allow the customer the opportunity to consider if they would like to take up the offer.

More information

For more information see ‘Sales practices – a guide for businesses and legal practitioners’. Visit cbs.sa.gov.au/ resources and search for ‘sales practices’ to read the online guide.

The guide includes some examples and case studies and also outlines the penalties for breaching sales practices requirements under the Australian Consumer Law.