Retailers put on alert about using misleading pricing

Media Release
Issued 11 May 2017
Release No. 104

Retailers put on alert about using misleading pricing

The Commerce Commission is today publishing an open letter to retailers, highlighting pricing practices which might breach the law, and offering guidance on how to avoid them.

Complaints about pricing were the single biggest category of complaint received by the Commission last year, and currently pricing is a particular area of focus for the Commission’s compliance education and enforcement work.

Commissioner Anna Rawlings said, “Consumers look out for sales and we know that sales can drive competition among retailers and value for consumers. However, when price claims are not accurate and discounts are exaggerated, consumers do not get the ‘bargain’ they believed they were getting. It is also unfair to other retailers who are offering genuine special prices and pricing their goods accurately”.

“We are observing that some retailers’ marketing strategies place significant reliance on the use of price promotions to drive sales. We are concerned that some retailers may be misleading consumers about the savings that they offer.” Ms Rawlings said.

“Overall, we want to improve trader compliance in this area through education which is why we have taken the step of publishing this letter. However, we will also continue to investigate consumer complaints and other cases that come to our attention. If necessary we will prosecute traders who we consider are breaching the Fair Trading Act by misleading consumers about the prices that they are paying or the discounts that they are receiving,” said Ms Rawlings.

Today’s open letter has been published on the Commission’s website and is being distributed to several thousand New Zealand retailers via Retail NZ.

It alerts traders to the recent $800,000 fine handed down to the two Bike Barn companies for misleading discount claims. In addition to the Bike Barn case, Trustpower was last year fined $390,000 for advertising which was misleading about pricing and applicable contract terms.

In the past, the courts have sentenced a number of other retailers prosecuted by the Commerce Commission in relation to misleading pricing practices.

The letter includes a one-page summary document with tips for retailers to consider when planning price promotions, including:

· ensure discounts are taken off the usual selling price

· don’t use fine print to hide important information like extra charges

· a ‘sale’ is a brief and limited opportunity to buy at a reduced price

· ‘clearance’ sales are only for clearing goods

· do not exaggerate savings to be made or the range of goods available at a discounted price

· be careful with claims like “lowest” and “cheapest” prices.

Retailers are also directed to the Commission’s fact sheets on pricing and fine print, and are urged to seek legal advice if they have any concerns about how to comply with the law.

Background
The Commission has previously taken numerous prosecutions or actions against retailers for a variety of pricing conduct, including:

· in February 45 charges were filed against Bunnings in relation to its various “lowest price” claims

· Trustpower was fined $390,000 in September 2016 for misleading consumers about the price and terms of a bundled electricity and broadband offer

· in 2015 several businesses including Air New Zealand, House of Travel and Nakedbus ended the practice of ‘opt out’ pricing, following investigation by the Commission. Jetstar later gave court enforceable undertakings to end the practice

· in 2012 the Commission warned Progressive Enterprises about beer sale promotions which claimed 20% or 25% off when in fact, in a number of cases, it had been a lengthy period of time since the beer had been offered at the higher shelf price being used as a comparison in discount advertising.

· The Warehouse was fined $209,600 in 2009 for various Fair Trading Act breaches relating to the advertised price of goods, using bait advertising, and making false claims that certain products were 'exclusive to The Warehouse'

· Air NZ was fined $600,000 in 2006, for misleading customers about the price of its airfares. It used a headline price which was not the total price of the available airfare and the existence and type of additional charges was not prominently disclosed.

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