Commission has big concerns about car dealers' false or misleading claims, more prosecutions to come
Published04 Jan 2000
The Commerce Commission is very concerned that car dealers continue to make false or misleading claims, and will take more prosecutions for alleged breaches of the Fair Trading Act.
Commission Chairman John Belgrave said that already in the last six months the Commission has successfully prosecuted one dealer, accepted settlements from five and warned a seventh.
Prosecutions against two dealerships have been filed and four more are still under investigation. More investigations will start as necessary.
The Commission's legal advice is that it should not name the dealerships it is prosecuting until they have had their first call in court, and to not name those still being investigated until after the investigations end.
Mr Belgrave said that he is particularly disappointed with dealers' poor compliance because of the considerable efforts made by the Commission and the Motor Vehicle Dealers Institute (MVDI) to educate them.
"We spoke at 14 MVDI seminars from Whangarei to Invercargill, we provided information through the MVDI, we used its newsletter and we have responded to hundreds of questions and requests from dealers.
"But the information we are receiving in complaints from dealers about each other, from consumers and from our own surveillance shows that the message has not sunk in.
"We have now published comprehensive guidelines clearly stating the Commission's view of how the Act applies to car dealers. If they are not prepared to accept our view of what is false or misleading to consumers, then enforcement action will continue."
Mr Belgrave said it is disturbingly common for significant additional costs to be omitted in promotions of new cars.
False or misleading claims about the prices of used cars are also common, as are false or misleading claims about their histories and characteristics.
The Commission's guidelines explain how the Fair Trading Act applies to car dealers, how it applies to contracts and has specific sections dealing with odometer readings and distance travelled, year of manufacture, vehicle specifications, prices, trade ins, auctions, free offers, finance, mechanical breakdown insurance and customers statutory rights. There is also advice on how to set up compliance programmes to help comply with the law.
The guidelines are being distributed by the MVDI and are available free of charge from the Commission.
Commerce Commission enforcement action since 1 July 1999 against car dealers for alleged breaches of the Fair Trading Act
Prosecution
Autoworld Richmond Limited was fined $8,000 by the Nelson District Court. Autoworld admitted that it breached the Act when it advertised a three-year guarantee with every second hand car. Car buyers did not get a guarantee. Instead, they got a mechanical breakdown insurance policy with claim limits and exclusions and they had to pay a $100 excess on every claim.
Settlements
BMW offered three models for payments of $209, $259 and $299 a week. Not disclosed in the promotions were final payments of $41,700, $48,150 and $58,750 respectively. BMW has acknowledged that its advertisements were likely to mislead consumers about the total prices payable for the cars advertised. It also acknowledged that it inadequately disclosed the deposits required and that the pictures in the advertisements may not have been of the standard vehicles available.
Mitsubishi offered a Galant for payments of $99 a week. It did not adequately disclose that, in addition, there were a final payment of $10,500 and a deposit of $6,250. Mitsubishi has acknowledged that the small print including these details was too small and not on the screen for long enough to be read and understood by consumers.
Holden' s promotion offering a Barina for $79 a week was misleading because it did not adequately disclose a $6,656 final payment and a $2,750 deposit. Holden has acknowledged that the small print including these details was too small and was in a place where it would not be noticed and understood by consumers.
Nissan' s advertised "Finance offer" did not state any amounts for deposits and final payments. These payments varied depending on the model and all were substantial percentages. Nissan has acknowledged that the small print including these details was too small and was in a place where it would not be noticed and understood by consumers.
Millennium Motors Limited advertised second hand vehicles that were not available at the advertised prices, and one that was not available at all. Compulsory "on road costs" were not included in the advertised prices. Millennium Motors has given signed undertakings setting out how it will change its advertising.
All five companies have given signed undertakings including that:
they will review or implement training and compliance programmes and report back to the Commission
the Commission may publicise the settlement, and
the Commission may take court action if the settlement is not honoured.
Media contact: Fair Trading Manager Ross McPherson
