Dell slapped on wrist over ads

The Federal Court has ruled that direct computer vendor Dell breached the Trade Practices Act in several ads it ran prior to November 2001.

The vendor was hauled over the coals by the Australian Competition and Consumer Commission (ACCC) over not clearly stating in its advertisements that delivery charges were compulsory when buying direct from the manufacturing giant.

Dell ran a series of advertisements between 1994 and 2001 where, either next to a listed price or in the fine print of an advertisement, consumers were informed of "delivery additional" costs. These delivery fees could rise as high as $99 on certain models.

After receiving a small number of customer complaints on the issue, Dell adjusted these advertisements to display "By delivery only -- standard fee $99" next to the specs for each machine advertised.

These changes were not enough to appease the sniffer dogs at the ACCC, who approached the Federal Court with claims that the former advertisements were misleading as they did not clearly state delivery was compulsory, not optional. On this point, the ACCC claimed a small victory, with the court forcing injunctions on Dell that prevent it from advertising in such a manner in the future. Dell has also been ordered to place corrective advertisements and pay for the ACCC's court costs.

What the ACCC couldn't pull off was pinning Dell for breaching sections 53(e) and 53C of the Act -- for misleading with respect to the price of a good or service. The ACCC argued that Dell should bundle the delivery fee in with any advertised price rather than displaying it as an option. But the judge ruled that delivery is a service and not part of the price of the product. The ACCC said it would "look further into the matter".

The ACCC was also seeking compensation for all of the PCs purchased through Dell at the time that the advertising was deemed inappropriate. With a price tag of some $11.5 million in compensation pay-outs, such a move would have crippled the vendor's local operations. "The judge basically said, ‘don't be stupid' to that," said Dell spokesperson Robert Small.

Despite the shallow victory, ACCC chairman Professor Allan Fels was content with the decision. "This decision makes clear that advertisers need to be up-front about additional costs," he said. "Price is a powerful drawcard. It lures the reader in. Prices must be accurate and unambiguous or else you run the risk of breaching the Trade Practices Act. Important pricing information should be precise and not confined to small print."

Dell spokesperson Robert Small said Dell was a natural target for such an ACCC campaign as it is the poster-child of direct selling, and the ACCC is looking to send out a clear warning to the rest of the market by going after the top dog. "The fact we changed our ad in the first place suggests that we listen to our customers," he said.

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