When a Retailer displays the Wrong Price

What happens when a retailer displays the wrong price? Let’s say, for example, the price displayed for a cell phone is R120 when it should be R1,200. The consumer sees R120 and thinks “Great, that is a good deal!” and decides to buy it for R120. The consumer gets to the till and is told “Sorry it is actually R1,200”. Is the retailer or supplier obliged to sell it for the price advertised? Can the consumer insist that they can buy it for R120 and get a deal of a lifetime?

In today’s retail sector a situation like this could occur in either:

• a shop in which case the Consumer Protection Act (CPA) applies, or
• online in which case the Electronic Communications and Transactions Act (ECT Act) applies.

A retailer displays the incorrect price in a shop

The general principle is that a supplier cannot display goods for sale without displaying a price in relation to those goods. The exception to this rule is if the goods in question are being predominately used as a form of advertisement.

If there is an error in the price, the supplier cannot insist that the consumer pay a higher price for the goods or services than the one they display. If more than one price is displayed, the consumer is not required to pay the higher of the two prices displayed. However, this does not apply if a new price fully covers an old price.

A consumer cannot hold the supplier to an erroneous price

If the price contains an inadvertent and obvious error, a consumer cannot hold the supplier to that price if:

1. the supplier corrects the error in the displayed price, and
2. takes reasonable steps to inform the consumer of the error and the new corrected price.

The CPA does not define what those reasonable steps might be. Suppliers will also not be bound to a displayed price if that price has been altered or tampered with by an unauthorised party.

Online retailers

The online retailer must display the full price of goods

In terms of the ECT Act, online retailers are required to provide the consumer with a sufficient description of the goods which will enable the consumer to make an informed decision. What constitutes an informed decision is not clear from the Act. The online retailer must display the full price of the goods including any additional extras such as transport of the goods and taxes (Section 43).

The ECT Act gives no direct guidance for a situation where an online retailer displays the incorrect price for goods or services. However, the ECT Act does require that any Terms and Conditions applicable to the transaction are available to the consumer through the website on which the goods or services are being sold. It must also be clear to the consumer how to access those terms and conditions (see Website Footers).

Online retailers must have clear terms and conditions.

Most online retailers regulate, in their terms and conditions, the situation where the price of goods or services are incorrectly advertised on the website. The scope of the rights of the consumer and the liabilities of the supplier for such a situation is found in those terms and conditions.

Online consumers must be provided with an opportunity to:

• review the transactions;
• correct any mistakes that they identify with the transaction and
• the opportunity to cancel the transaction before placing their final order.

Consumer have the right to cancel online transactions within 14 days

If an online retailer does not comply with the regulations regarding the requirements mentioned above the consumer has the right to cancel the transaction within 14 days of receiving the goods or services. If the consumer cancels, then any goods or services supplied by the retailer must be returned. The supplier will then be liable to refund all the payments made by the consumer minus the cost of returning the goods to the supplier.

Consumers (not retailers) make offers

Online sales are confusing because when a customer selects and pays for goods the parties agree that this is an offer to purchase from the online retailer. The retailer can then choose to accept or reject that offer. So, what the online retailer is actually doing is advertising their products at a particular price and the consumer responds by offering to purchase those goods at that advertised price. Most online retailers state in their terms and conditions that this transaction becomes a finalised sale when the goods are delivered to the customer.

This puts the online retailer in the position of an advertiser and therefore, some of the marketing regulations in the CPA may be applicable to them.

Another potential area of confusion is that ECT Act refers to the supplier (i.e. the online retailer) as ‘offering’ goods or services to the consumer. This is the opposite of the legal relationship that most online retailers have with the consumer i.e. one of advertisement and the consumer offering to purchase. Whether online retailers are free to deviate from the wording of the ECT Act and alter this relationship so that they are in the position of receiving an offer rather than making it is unclear.

Another potentially problematic area is the meaning of ‘transaction’ in the ECT Act and what a transaction consists of in an online sale. The ECT Act permits the consumer to cancel the transaction but when the supplier can cancel is less clear. To add to this confusion, the Act distinguishes between transactions and orders and in the context of the ECT Act the term ‘order’ seems to signify a stage in the process that occurs before the transaction.

Suppliers should reject offers and not cancel transactions

The definition of transaction in the ECT Act is unhelpful but the CPA defines transaction as an agreement between persons to supply goods or services in return for money. The CPA goes further to define an agreement as an arrangement that purports to establish a legal relationship between the parties. It does not specify what that legal relationship is. So, it could be the finalised sale which would mean that the consumer is only permitted to cancel after the sale is finalised. The term ‘agreement’ could also include the phase where the consumer has offered to buy the products but the sale has not yet been finalised. If this is so, then the supplier could reject the offer if they are unable to perform that agreement on the grounds that the goods are not available (section 46). This section could be understood to mean that goods classed as unavailable includes goods that are advertised at the incorrect price. If the term ‘agreement’ includes an offer, then the supplier must reject the offer (not cancel) and refund any payments.

For more on online retailers see Legal Notices for Online Stores.