In a landmark decision that has implications for all retailers in New Zealand, the Court of Appeal yesterday defined when so called "free" promotions are misleading under the Fair Trading Act.
The Court answered two questions about free offers.
It said if customers could pay a cheaper price when they do not want the free item, then the item was not free and the promotion was misleading.
It also said that goods which must be bought to get the free item must be sold at their usual price. If their price is increased during the promotion, then the item was not free and the promotion was misleading.
Commerce Commission Chairman Dr Alan Bollard said the decision confirms the Commission's view that the common sense approach that "free" means no extra costs, is correct.
"The Court's decision applies to far more than just this one case," Dr Bollard said. "The Court has given a clear decision that has implications whenever any goods or services are offered free.
"Significantly, this decision supports the approach the Commission has taken when looking at false or misleading claims about free offers."
The Court of Appeal's decision follows from a Christchurch District Court case about a "buy one get one free" promotion. The Commission alleged the promotion was false or misleading because the price of the goods which had to be bought to get the free offer had been increased during the promotion.
The defendants were convicted and then appealed to the High Court. The High Court quashed the convictions. The Commission then appealed to the Court of Appeal.
The case has been remitted to the District Court to enter convictions and fix appropriate penalties.
Media contact:Manager Fair Trading , Keith Manch
Phone work (04) 498 0908, home (04) 479 7105
Communications Officer, Vincent Cholewa
Phone work (04) 498 0920, home (04) 479 1432
The defendants were Mr Craig Adair and Craig Adair Cycles Limited.