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Flyerz / E Egan / 9425

Ruling of the : ASA Directorate
In the matter between:
Emrice Egan Complainant(s)/Appellant(s)
Max Graphics cc Respondent

30 Jul 2007

Mr Egan lodged a consumer complaint against a Flyerz print advertisement that he received in his mailbox.

The advertisement advertises the various prices and quantities of full colour A5 gloss flyerz, as, inter alia:

“FULL COLOUR A5 GLOSS FLYERZ
5,000 R 999
10,000 R 1499”

It further states “ALL PRICES EXCLUDE VAT”.

COMPLAINT
The complainant questioned whether it was legal for companies to advertise prices that exclude VAT.

RELEVANT CLAUSE OF THE CODE OF ADVERTISING PRACTICE
In light of the complaint Clause 3.3 of Section II (Legality) was taken into account.

RESPONSE
The respondent submitted that most business to business advertising is done excluding VAT, as VAT registered businesses can claim the VAT back. This is the reason for it advertising its prices as VAT exclusive. Furthermore, the advertising clearly states this is the case. The advertisement is not intended for the public, but rather for businesses.

ASA DIRECTORATE RULING
The ASA Directorate considered the relevant documentation submitted by the respective parties.

The complainant submitted that the respondent is advertising prices for its goods without including the VAT amount. He submitted that this is standard practice for businesses that are VAT registered as they are entitled to purchase goods excluding VAT. However, this advertising is usually in the form of price lists available only to company procurement divisions. This cannot be the case for the respondent, as its advertisement is distributed to the homes of consumers.

The respondent concurred with the complainant that most business to business advertising does not indicate VAT, as registered businesses can claim back VAT. Its advertising is not directed to the public but rather to businesses. It has done mail drops to houses as a means of advertising and reaching its market, as all business owners live in houses.

In Planet Fitness / P Nganwa and others (24 August 2004), the Directorate received an opinion from the South African Revenue Services confirming the provisions of section 65 of the Value Added Tax Act. In terms thereof it is unacceptable to advertise a price “excluding VAT” without indicating the amount of VAT and the total price including VAT.

The expert opinion received from the South African Revenue Service stated that in terms of section 64 of the Value-Added Tax Act, 1991, any price charged by a vendor in respect of a taxable supply of goods or services shall be deemed to include VAT.

Based on the above, the respondent’s advertising appears to be in contravention of Section 64 and 65 of the Value-Added Tax Act 89 of 1991, which requires all advertised prices to include or indicate VAT. The Act makes no exception for business-to-business advertising and there is therefore no need for the Directorate to determine who the target market in fact was.

Accordingly, the advertising is in contravention of Clause 3.3 of Section II of the Code.

Given the above finding, the advertising:

  • Must be withdrawn;

  • The process to withdraw the advertising must be actioned with immediate effect on receipt of ruling;

  • The withdrawal of the advertising must be completed within the deadlines stipulated by Clause 15.3 of the Procedural Guide; and

  • The advertising may not be used again in its current format.

The respondent’s attention is also drawn to Clause 19.4 of Section II.

The complaint is upheld.

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