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Bike Barn fined $800k for misleading pricing

10 February 2017

Bike Retail Group Limited and Bikes International Limited, the joint operators of Bike Barn in New Zealand, have today been fined $800,000 in the Auckland District Court.

The two firms pleaded guilty to a combined 18 representative charges brought by the Commerce Commission under the Fair Trading Act regarding marketing and sales conduct between 1 July 2013 and 30 June 2015.

Commissioner Anna Rawlings said that Bike Barn had attracted customers by creating misleading impressions about the discounts available on bicycles and the duration of the discounts.

“Bike Barn used exaggerated discounting strategies that gave the impression to customers that they were purchasing bikes at significant mark-downs from the normal retail price – typically 50% off. It also advertised clearance specials that created an impression that the discounts were available for a limited time only,” Ms Rawlings said.

“Neither was true. In fact, the discounted prices were Bike Barn’s usual selling prices. Out of nearly 6000 bike sales we analysed during our investigation, only 30 were sold at the so-called full price.”

Bike Barn’s clearance sales and “final days” wording in its advertising gave the impression that promotions were about to end and created a misleading sense of urgency for consumers. Its products were commonly available at the same price before and after these advertised sales.

“Today’s judgment sends a strong message to all retailers that employ discounting strategies. Sales are an important marketing tool and, when genuine, drive competition and value for consumers. But it’s vital that deals offer a real saving and products are not promoted in a way that entices consumers to make a purchase under false pretences,” Ms Rawlings said.

In sentencing Bike Barn, Judge Sharp noted the conduct was “pervasive” and “calculated”.

“Consumers were disadvantaged by false statements, competitors may have been disadvantaged, but the real impact of these offences was that the public were entitled to be protected against things that give impressions that are not correct.”

The $800,000 fine Bike Barn received today is one of the largest handed down under the Fair Trading Act in New Zealand.

Bike Barn changed its advertising and discount strategy in response to the Commission’s investigation.