In what is believed to be the first successful prosecution of its type in the world, Edge Computer Ltd has admitted breaching the Fair Trading Act by selling computer motherboards which did not have the memory claimed for them.
Edge was prosecuted by the Commerce Commission and appeared in the Wellington District Court today.
Commission Chairman Dr Alan Bollard said that Edge deliberately described the dummy motherboards as having 256k of cache memory chips installed, when Edge knew the motherboards had no cache memory at all.
He said that documents seized by the Commission during the execution of search warrants included specific references to "dummy" mother boards.
Real cache memory helps a computer to work faster, particularly when running popular multi-media programmes like Encarta. At the time of the admitted offences, 1995, cache memory was a major selling point for computers.
"Customers paid for a feature which they did not get," Dr Bollard said.
Tests showed that the dummy motherboards had been installed with chips that looked identical to functioning cache memory chips but were only plastic mouldings with no working components.
Other changes had also been made so that when a computer fitted with a dummy motherboard was started or tested, it would falsely state on its screen that it had 256k of cache memory. The relevant pages had also been removed from some motherboard manuals.
The summary of facts presented to the Court by the Commission and Edge included evidence that Edge had imported at least 9,357 motherboards described as having 256k of cache memory.
The boards were used in Edge computers with 486 central processing units and were sold to other New Zealand assemblers for use in other brands of computer.
It is impossible to track any specific motherboard after it was sold by Edge. Edge supplied dummy boards could be included in any New Zealand made 486 computer.
Dr Bollard said that people with 486 computers that appear to be running slowly should exercise their rights under the Consumer Guarantees Act. The customer should go back to their retailer, the manufacturer or the importer to check for any problems and get a remedy if necessary.
"This was a case where customers could not check the promotional claims made and had to rely on the information provided by retailers," he said. "In turn, most retailers had to rely on the information provided by their manufacturer.
"Search warrant evidence shows retailers were sent price lists listing motherboards with 256k of cache memory, and that they specifically ordered these motherboards.
"The chips on dummy motherboards look real. There would have been no reason to test individual motherboards - manuals and on screen information had been altered.
"This deception was carried out methodically and, in the Commission's opinion, deliberately, and therefore involved a major breach of trust. The vast majority of customers had to rely on technical information explained to them by retailers. They could never test the claims themselves.
"We have asked the Court to impose a large fine as a penalty against Edge and as a warning to any other supplier of computer components considering similar action."
