Autoworld Richmond Limited yesterday pleaded guilty to five charges laid under the Fair Trading Act in the Nelson District Court. Judge Tuohy fined the company a total of $8,000.
Autoworld Richmond Limited advertised a three year guarantee with every purchase of a second hand car. However car buyers did not get a guarantee. They got a mechanical breakdown insurance policy with claim limits and exclusions and they had to pay a $100 excess on every claim.
Judge Tuohy found that the advertising was misleading and a breach of the Fair Trading Act. Car buyers were misled into believing they had a guarantee when in fact what they had was an insurance policy.
Autoworld Richmond Limited advertised the "guarantee" extensively in the Nelson region on television and radio and on large and prominent signs at its sales yard. It is the first Fair Trading Act case to be considered by the courts in Nelson.
John Belgrave, Chairman of the Commerce Commission, said that it is important for all advertising, to accurately describe the deals being offered to car buyers. Let this be a warning to all car sales operations that if what is being offered car buyers is in fact an insurance policy they should say so. It cannot be advertised as a guarantee.
The Fair Trading Act requires all advertising to be accurate so that consumers can make an informed choice and so that law abiding traders are not disadvantaged by those who do not comply with the Fair Trading Act. The law does not deem it sufficient for deceptive advertising to be corrected at the point of sale because customers are more likely to buy once at the car sale yard.
The $8,000 penalty imposed by the court would have been higher were it not for the following factors:
- this was Autoworld's first conviction
- Autoworld was a relatively small company in a provincial centre
- Autoworld was to an extent following industry practice in its advertising.
Mr Belgrave said that any other car dealers still advertising insurance policies as guarantees should immediately change their advertising or they too could face enforcement action by the Commerce Commission.
