The Federal Court has brought to an end a long-running legal stoush between furniture giants Super A-Mart and Nick Scali, ordering Super A-Mart to stop running advertisements comparing one of its sofas to one sold by Nick Scali, after finding the ads could have misled consumers.
The legal fight, which began back in 2010, reached a conclusion on December 23 when Justice David Yates made orders that Super A-Mart be permanently banned from running advertisements stating that its “Excellence” lounge suite is of the same quality or composition as Nick Scali’s “Rajah” lounge suite.
Nick Scali took Super A-Mart to the Federal Court after the latter ran a television advertisement (later uploaded to YouTube and Super A-Mart’s website) comparing Super A-Mart’s “Excellence” suite to the “Rajah” suite, highlighting the fact that at $3,000 the Excellence suite was less than half the price of Nick Scali’s $7,000 Rajah suite.
However, Nick Scali claimed that comparing the two suites was inaccurate as it suggested the two suites were of similar quality and composition, when in fact the Nick Scali suite was of a higher quality.
Nick Scali also claimed in court that Super A-Mart sales people were telling prospective customers that the quality of the suites was the same and that the price difference could be explained by factors such as Nick Scali’s large mark-up or Super A-Mart’s stronger purchasing power.
Yates agreed with Nick Scali’s claim that the television commercial was likely to mislead consumers and as such breached the Trade Practices Act.
“I am satisfied that the respondent has… falsely represented that the Excellence suite is of a particular ‘quality’ or ‘composition’ (namely, that it has the same qualities and composition – the same physical attributes – as the Rajah suite), contrary to s 53(a) of the Trade Practices Act,” he said in his judgement.
“For the same reason, in making the price comparison in the way that it has, the respondent has also engaged in conduct, in trade or commerce, that is misleading or deceptive or likely to mislead or deceive, contrary to s 52 of the Trade Practice Act.”
However, Yates did not find that the sales executives had, as Nick Scali claimed, suggested to customers that the two sofas were exactly the same and dismissed these claims.
But in an ironic twist given the expense of running a Federal Court case Yates did not award Nick Scali damages because it could not prove it had suffered a loss.
“The applicant has not established that it has suffered actual loss or damage by reason of the contraventions it has alleged or, more particularly, by the contraventions I have found. It follows, as a consequence, that its claim for damages must be dismissed,” Yates said.
That judgement was made in July, but the decision on orders banning Super A-Mart from using its comparison-based advertising was not made until December 23.
As part of that judgement, Yates also ordered Super A-Mart to pay 80% of Nick Scali’s costs.
Both Nick Scali and Super A-Mart were contacted for comment but were unavailable prior to publication.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
