An important Supreme Court precedent may make companies hesitate before misleading consumers and offering a large discount on products, when it is not genuine. In a new ruling, the supreme court accepted the state’s position and stated that the practice used in the ceramics market, according to which inflated prices are displayed alongside large discounts – is illegal.
The story began in 2019, when the Tel Aviv district approved a class action lawsuit against seven companies that market covering products, plumbing flooring and sanitary tools. The reason: it states that those companies mislead consumers about the regular price and present consumers with a false representation according to which they grant them large discounts.
Regarding the decision to approve this lawsuit, a number of large ceramic companies, including Negev Ceramics, Aloni, Haresh and others, filed an appeal to the Supreme Court. At the same time, the representative plaintiffs filed an appeal in relation to two companies whose claims were not approved in their case.
Yesterday, the Supreme Court rejected the bulk of the appeals and left the class action intact. In fact, the court adopted the legal position of the Consumer Protection and Fair Trade Authority, through attorney Ilana Mizrahi together with the civil department of the prosecutor’s office represented by attorney Yoav Shaham.
The court stated in the decision: “The imposition of responsibility on this ground is in terms of enforcing a legal prohibition imposed on the appellants and there is no room for the claim that the enforcement of the prohibition is not a matter for the court… The Consumer Protection and Fair Trade Authority… In matters related to consumer protection… expressed in this proceeding an explicit position according to which the deception regarding the normal price under circumstances such as ours is a violation of Section 2(a) of the law…”.
As part of the decision, the Supreme Court judge Y. Wilner (joined by judges E. Fogelman and N. Solberg) that: “The price marked on a product should reflect the normal price at which the product is usually sold. The meaning of a discount is a reduction from the normal price. When a dealer adopts a policy, within the framework of which he marks products at prices from the beginning are higher than the prices at which the products are usually sold, and presents a reduction from the price marked as a ‘discount’, then it not only misleads the consumer about the normal price of the products; but also presents him with a false representation, according to which he supposedly received a ‘discount’.”
In relation to the companies’ claim that consumers buy a “basket” of products and therefore it is not possible to set a price for the individual product, the court rejected their claim because “even a consumer in a supermarket, for example, often buys a basket of products, however, each product in the supermarket has its normal price, which is displayed on -Regarding him… the claim that “there is no such thing as a ‘regular price'” does not exempt the appellants from complying with the provisions of the law, including their obligation to display on a product its regular price.
The Supreme Court even accepted the state’s position that there is room to deviate from the District Court’s determination and accept the Consumer Protection Authority’s position that when it comes to inflated prices that do not reflect the actual prices, then this is prohibited even if it is a small gap between the marked price and the usual price. In summarizing things, it was emphasized that: “Imposing liability on the grounds discussed will benefit consumers” and this is contrary to the claims of the companies.
Now, many companies may be more cautious in giving discounts. The big question is when we will see the next class action in another industry and how it will be received in court.
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