Used vehicle dealer fined

Used motor vehicle dealer 2 Cheap Cars Limited was fined $438,000 in July for its use of “warranty waiver” documents and for its “liquidation sale” and “84% off” advertising claims. The company had earlier pleaded guilty to 10 charges under the Fair Trading Act, following a Commerce Commission investigation.

Between 2014 and 2017, the company routinely asked car buyers to sign a “warranty waiver” document if they chose not to purchase an extended warranty. Even though consumers had the protections of the Consumer Guarantees Act (CGA), which applies to used and new goods including vehicles.

In advertising for two sales in 2017, the company also made statements including:

  • “Japanese imported vehicles liquidation sale”
  • “2 Cheap Cars is in hot water, it must liquidate immediately”
  • “A massive price drop this weekend!”

In fact, most of the 710 vehicles then for sale nationwide were not discounted at all or had discounts of as little as $5, and 2 Cheap Cars was not in, or going into, liquidation.

In his written sentencing decision Judge Ronayne said this advertising was “deliberately misleading rather than simply careless” and “behaviour which was a complete departure from the truth.”

In response to the sentencing, Commission Chair Anna Rawlings said, “This advertising was misleading because it suggested that many vehicles would be significantly discounted, due to the pressure of the company being in liquidation. Retailers should not encourage consumers to purchase with spurious calls to act urgently to take up a discount and they should not overstate the savings that are available when discounts are advertised.”

The final component of the case related to 2 Cheap Cars’ 2017 newspaper advertising which included the phrase “84% off”. The discount was not off the price of a vehicle but off the price of a $300 GrabOne voucher that could then be used towards purchasing a vehicle.

Judge Ronayne said this behaviour was “misleading and careless and, when viewed as a complete advertisement, tantamount to devious.”

2 Cheap Cars was the third car dealer to be charged under the Fair Trading Act in the last year. In conjunction with our enforcement action in this industry, we have also continued our educational work with traders in the industry and our advocacy initiatives included the development of a tip sheet for motor vehicle dealers covering the advertising of vehicles for sale and relevant Consumer Guarantee Act provisions. A trader-focussed marketing campaign was also developed with the tagline ‘Tell it like it is’. Ads ran throughout July 2019 in three trade publications, reinforcing the message of the obligations and responsibilities of traders selling motor vehicles.

Fine for misleading place of origin claims

New Zealand smallgoods producer Farmland Foods was also fined $180,000 in July for misleading consumers about the place of origin of some of its ham products. The company pleaded guilty and was convicted on three charges under the Fair Trading Act relating to labelling on packaging of three sizes of its ‘Heritage Cooked on the Bone’ ham products.

The packaging labels contained numerous claims such as “100% NZ owned, Farmland Fresh, made in the country” and “If it’s Farmland you can be sure it comes from the best nature has to offer. Made by New Zealanders, for New Zealanders … it’s where good things grow”. The combination of the imagery, choice of words and overall presentation of the Farmland Foods’ packaging in close proximity to references to New Zealand(ers), the country farm and a Bulls address on the packaging, gave consumers the false impression the products were made from New Zealand reared pork, when the majority of the pork was actually imported.

In sentencing, Judge Rowe said the representations involved a “significant departure from the truth.” He said, “It is likely that shoppers are moved more by impression than analysis” and that “the public is entitled to a high degree of care in relation to their interests and the confidence they may place in business in New Zealand.”

Commission Chair Anna Rawlings said, “Accurate information on packaging is important for consumers who rely on the information. Some people are often willing to pay a premium for products they believe are New Zealand made, and for some this also represents an important ethical decision.”

“Country of origin claims are also important for local manufacturers who want to protect the high value placed on genuinely New Zealand made products.”

The Consumers’ Right to Know (Country of Origin of Food) Act will make it mandatory for certain food products, including cured pork products (like ham and bacon), to state the country or place of origin. Failure to label the products as required will be a breach of the Fair Trading Act.

First litigation concerning online reviews

And finally, we also filed charges in July against Bachcare Limited for allegedly misleading consumers by manipulating online reviews posted by users of its accommodation services. It is the first time the Commission has taken litigation action on a matter concerning online reviews.

We allege Bachcare removed negative comments from some consumer reviews before publishing them on its website and did not publish any reviews to which consumers had given a star rating of less than 3.5 out of 5. In doing so, we allege the company engaged in conduct that was liable to misled consumers by creating artificially positive impressions about certain properties.

Online reviews provide an increasingly important source of information for customers contemplating the purchase of goods and services. Reviews must be genuine and presented in a way that does not mislead the reader about the overall message intended by the reviewer. In conjunction with our work on this case, we also produced guidance for businesses collecting and publishing online reviews to help educate them about their obligations.