A New Zealand department store chain has been found guilty of breaching the Fair Trading Act and was fined $10,000 in the Christchurch District Court today.
Farmers Trading Company Limited was fined for displaying a television at its Eastgate store in Christchurch as new a year after the television had been returned by a previous customer to its Rangiora store because it had stopped working. The repaired television was sold to another customer who believed it was new. Farmers claimed that it had made a reasonable mistake and that staff at the Eastgate store did not know that the television had been previously repaired when they displayed it as new. The Court found that Farmers had not made a reasonable mistake.
Although Judge Walsh accepted that Farmers' action had not been deliberate, he described the company's actions as highly careless. At the time the repaired television was re-sold, Farmers had no formal policy in place for the handling or resale of repaired goods. In addition, it did not have a system whereby the television set could have been tracked to find out where it had come from and why it had appeared at the Eastgate store. The Court accepted, however, that there was minimal harm and that this case represented an isolated incident. The Judge also noted that Farmers had introduced a written policy for dealing with second hand goods subsequent to the Commission's investigation.
It is a breach of the Fair Trading Act to represent something as new when it is second hand or reconditioned.
"For consumers to be able to make informed purchasing decisions they need to be aware of all the relevant information, including previous history of any goods. The onus is on businesses to not only ensure that they are providing accurate information to consumers but to also ensure that they have robust compliance programmes in place," said Adrian Sparrow, Commerce Commission's Director of Fair Trading.
"It was disappointing that, even after the issue was raised by the complainant, it was not until the Commission's investigation was underway that Farmers took steps to implement a nationwide policy to prevent such breaches happening again. Any business, large or small, must ensure that staff have an understanding of their obligations under the Fair Trading Act. Businesses must also support their staff by having processes in place to ensure that those obligations are met and that consumers have access to all the information that they are entitled to receive about goods they are purchasing," said Mr Sparrow.
"While some consumers may be happy to pay less for goods that have been shop-soiled or damaged and then repaired, it is important that they are made aware of the reason for the lower price. While it may be easy for consumers to recognise damage and repairs on items such as clothing, it is difficult for the ordinary consumer to know whether or not an electrical appliance has been repaired," said Mr Sparrow.
"When the Fair Trading Act is breached, not only are consumers affected but competitors who are compliant have been undermined."
Background
Farmers Trading Company Limited operates over 55 department stores in rural and city locations around the country. As well as selling clothing, footwear, underwear, accessories and health and beauty products, Farmers sells homewares, manchester, appliances, electronics, communications equipment and furniture.
The Fair Trading Act
Section 13 False (or misleading) representations
No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,
(a)(make a false or misleading representation) that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use; or
(d)(make a false or misleading representation) that goods are new, or that they are reconditioned, or that they were manufactured, produced, processed, or reconditioned at a particular time
Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.
