New Zealand: New Zealand Fair Trading Act – 2006 In Review

The Commerce Commission (Commission) monitors compliance with the Fair Trading Act, which is our principal consumer protection legislation. 2006 was a busy year for the Commission as it focused on product advertising and on generating fraud awareness amongst consumers. The year also saw the Commission pursue a number of high profile cases in relation to misleading pricing, particularly in the banking and air travel industries.

The Commission commenced 2006 with a stern warning for businesses – fuel charges must be incorporated into the price, not added as a surcharge or additional charge. The Commission’s warning followed a District Court ruling the previous year concerning Air New Zealand’s advertising. In that ruling, the Court held that fuel costs are a normal operating cost of business and need to be included in prices. Since that judgment, the Commission has contacted over 70 businesses, finding 32 of those to be imposing additional fuel charges.

As part of Fraud Awareness Month, the Commission warned New Zealanders to be wary of scams promising great wealth for little input. They suggested consumers look out for certain characteristics which typically identify a scam. Scam identifiers include that the proposition comes out of the blue, sounds like a quick and easy way to make money, suggests there is almost no effort or risk, asks you to give personal information such as your banking details, and sounds too good to be true. The Commission drew consumers’ attention to the following scams:

Lottery and prize scams

The Commission warned consumers to be aware of lottery and prize scams. In particular, consumers were warned of lottery scams initiated by a letter or email to a consumer alleging the consumer had won a significant prize in an overseas lottery. These emails often seek contact details and, if replied to, are followed by requests for bank account and identity information. The Commission urged consumers who receive such an email to, ‘Check it, delete it, and destroy it.’

Phishing emails or calls

The Commission also warned consumers of the new intensity and technical sophistication of phishing scams. These scams include sending consumers emails, which are typically alleged to be from a New Zealand or Australian retail bank and include a link to an apparently authentic website. These emails aim to fool consumers into disclosing their personal banking information and passwords. The Commission provided tips to help consumers protect themselves from such scams, including keeping your computer secure, only using the official website of your financial institution, avoiding using computers at public places (such as internet cafes and libraries) for online banking, and never clicking on a link within an email from an unknown source.

Avoid get rich quick schemes

The Commission recommends consumers protect themselves from pyramid selling and 'work at home' scams by never entering into investment schemes without independent financial advice, never accepting offers from strangers and, if you become suspicious of a scam, checking with the Commission.

In March, ANZ National Bank was fined $1.325 million after pleading guilty to charges of failing to disclose properly the fees charged for overseas currency transactions on its credit cards. This was the highest total fine ever imposed under the Fair Trading Act in a single case. The bank also agreed to refund $10 million to ANZ and National Bank customers who had made foreign currency transactions on their credit cards. The Commission believed that disclosing the fees correctly would generate greater competitive pressure on banks, ultimately reducing the fees charged to consumers. In July, BNZ also pleaded guilty to similar charges. BNZ was fined $550,000 and agreed to pay $5 million in compensation to customers who had made foreign currency transactions on their cards. In September, Westpac admitted it had also breached the Fair Trading Act. The bank was fined $570,000 and agreed to pay $4.5 million in compensation to customers.

May saw a first for the Commission when it fined a butcher for falsely labelling products as ‘certified organic’. Jason Arthars and Clark’s Organic Butchery Limited were fined $10,000 when the company falsely labelled products as ‘certified organic’ and ‘allergy free’. The company also claimed to be certified by New Zealand’s principal certification agencies when it was not.

In June, Ron Ross and Ross’s Super Meat Store Limited were also fined when they falsely labelled products as ‘certified organic’. Together, they were found guilty of falsely advertising chicken as ‘certified organic chicken’ when the chicken (although sourced from certified organic farms) was processed at a butcher which was not a certified organic producer. Additionally, the butcher falsely advertised chicken nibbles as ‘organic’ and falsely sold turkeys as ‘fresh’. The turkeys had been supplied to the butcher frozen and were then thawed.

Following the court decisions, the Commission has stressed that organic and fresh products command a premium price and consumers must be able to trust the integrity of the labels. The fines imposed by the court should send a strong message to those involved in the organic food industry that they should be careful in the labelling of their products.

In 2005, Zenith Corporation was found guilty of breaching the Fair Trading Act by misrepresenting that its Body Enhancer liquid would promote fatburning, assist muscle growth, detoxify the liver and prevent collagen depletion. In July 2006, Zenith Corporation was sentenced for these offences and ordered to undertake a nationwide corrective advertising campaign and pay a fine of $632,000.

In August, the Commission warned Australian pie maker Mrs Mac’s when testing revealed that the company’s meat pies did not have as much meat as its packaging claimed.

Motor vehicle insurer IAG (the parent company of State Insurance) was fined $127,000 for allegedly misleading its customers about their right to choose a windscreen repairer when making an insurance claim. Although State Insurance’s brochures indicated policy holders could choose any company to carry out the repairs, many customers were told by staff members that they had to use a certain company. The large fine imposed by the Court arguably reflects the large number of people that may have been affected by the statements.

In October, Qantas was found guilty of breaching the Fair Trading Act after misleading the public through its advertising. Some Qantas advertisements failed to disclose extra charges, while others imposed additional charges to cover operating costs, such as fuel charges, which should have been incorporated into the price. This prosecution followed the Commission’s prosecution of Air New Zealand for similar behaviour earlier in the year.

The Commission indicated that the Court’s ruling reinforces New Zealanders’ right to get accurate information about prices. Qantas and Air New Zealand are now using all-inclusive prices in their advertising.

In October, Carter Holt Harvey was fined $900,000 for breaching the Fair Trading Act by selling timber that did not meet the grade claimed on the packaging. Carter Holt Harvey was investigated by the Commission after concerns were raised by the New Zealand Timber Industry Federation. An internal Carter Holt Harvey report indicated that since 2001, the company knew that its timber was not consistently meeting the grade claimed, but felt that to stop labelling it as the higher grade would be ‘financial suicide’.

In October, two manufacturers of insulation products, Tasman Insulation New Zealand Limited (the manufacturer of Pink Batts) and Autex Industries New Zealand Limited (manufacturer of Greenstuff), were warned that they may have breached the Fair Trading Act when their packaging misrepresented the quality level of their products. As both companies acted quickly, taking corrective action to prevent misrepresentations in the future, no further action was taken by the Commission.

In December, Harpers’ for Cars Limited admitted breaching the Fair Trading Act by failing to supply Supplier Information Notices with the used cars it sold on Trade Me. Supplier Information Notices must be provided with all sales of used motor vehicles. They provide information such as the make and model of the vehicle, odometer reading and whether the vehicle has a security interest registered against it. The Commission commented that a Supplier Information Notice is vital for online car purchasers who cannot visually inspect the vehicle and must rely solely on the information provided by the trader.

Children’s wear retailer Tian En Trading Company, trading as Bobbe Children’s Wear, together with its director, were fined $7,000 after admitting to breaching the Fair Trading Act when it failed to attach country of origin, fibre content or care details to a large amount of clothing and footwear it was selling.

The Mill Liquorsave Limited was fined $10,000 after its use of a misleading promotional flyer. The flyer gave the impression consumers would receive a free windbreaker if they purchased an 18 bottle pack of beer. However, customers were required to buy up to six 18 bottle packs before they were eligible to receive a windbreaker.

In 2007, the Commission is likely to continue to focus on misleading pricing, packaging and promotions. We have already seen the results of the Commission's investigation into the Vitamin C content of Ribena.

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