Commerce Commission action against cellphone retailers is continuing, with a settlement in which Cellular City Limited, trading as Cellphone City, has admitted its advertising breached the Fair Trading Act.

Commission Acting Chairman Peter Allport said that under the settlement Cellphone City will pay the Commission's legal costs and for a compliance seminar for cellphone dealers in Auckland.

Mr Allport said that the Commission will today withdraw the charges it had filed against Cellphone City in the Auckland District Court.

Cellphone City has admitted that it breached the Act by making misleading claims about prices and the existence of conditions in cellphone promotions.

Cellphone City's newspaper advertisements showed a cellphone with a price in large print. In very small print were various additional costs and conditions attached to the offer. Over time, the already very small print became even smaller.

Courts have ruled in several previous cases that they must consider the overall impression created by the large print, pictures, colour and other elements of an advertisement.

"Small print cannot save a representation from being misleading," courts have stated.

Mr Allport said that the Commission is pleased with the outcome of this case.

"Not only has Cellphone City corrected its own actions but it is helping ensure that other cellphone retailers also comply with the law," he said.

Cellphone retailing is an area of considerable concern to the Commission because its surveillance shows that breaches of the Fair Trading Act appear to be common in this industry. It is one of the industries the Commission has decided to focus its attention on, and education, investigations and enforcement action will continue.

"The poor level of compliance in this industry is disturbing," Mr Allport said. "The Fair Trading Act is not new, it has been law for more than 10 years.

"Cellphone retailers must learn about it and comply with it. If they do not, then more prosecutions will follow."

The Commission has previously successfully prosecuted four cellphone retailing companies: Cellular Systems Limited, Cellphone Warehouse Limited, Pacific Telephones Limited which trades as Cellular One, and Ben Rumble Communications Limited. Mr Rumble was also convicted as an individual; this is subject to appeal. Court action against against a fifth company, BellSouth, is continuing. Another company, Hart Candy Communications Limited, admitted breaching the Act and entered into a settlement with the Commission.

Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its website www.comcom.govt.nz