New Zealand's consumer law watch-dog has issued an open-letter to retailers warning against misleading pricing practices. The letter was prompted by the Commission receiving a large number of complaints about misleading prices last year. 

Consumers have complained that retailers are exaggerating discounts, advertising products as “on sale” when they are always available at that price, relying on fine print to charge extra fees and advertising products as on “clearance” when they remain available at the same price following the so-called “clearance sale”.

These practices would all breach the Fair Trading Act 1986 which prohibits misleading conduct in trade. Maximum fines for breaching the Fair Trading Act increased in 2014 to $600,000 for companies and $200,000 for individuals. For repeat offenders, directors and management can also be banned from involvement in the management of any company for up to 10 years. The risks are therefore becoming more significant and are intended to deter offending.

In its letter, the Commerce Commission refers to recent fines it has issued for misleading advertising as a warning to other New Zealand retailers. For example, earlier this year Bike Barn was fined a total of $800,000 for misleading consumers about the prices advertised for its bikes. Bike Barn exaggerated the extent of the discounts it was offering and how long the discounts would be available for. It was revealed that the discounted prices were actually Bike Barn’s usual sale prices. This fine was one of the largest ever made under the Fair Trading Act. The letter also refers to a $390,000 fine issued to Trustpower last year for misleading consumers about the price and terms of its bundled electricity and broadband promotion.

A full copy of the Commission’s letter can be found here: www.comcom.govt.nz/dmsdocument/15411

Together with its letter, the Commission has helpfully published some tips for retailers advertising price promotions, see www.comcom.govt.nz/dmsdocument/15410.

Retailers should be aware that pricing is a particular area of focus for the Commission and take care to ensure their products and services are priced accurately.