The Auckland High Court on Friday upheld convictions and fines totalling $11,400 against two cellphone companies who had previously been found guilty of breaching the Fair Trading Act.
The Commerce Commission prosecuted Cellular Systems Ltd and Cellphone Warehouse Ltd in May this year for making misleading claims about the prices of cellphones.
The companies had advertised cellphones for $29 plus GST, $39 including GST and $69 plus GST each.
The advertisements did not state that the cellphones were only available if customers paid an additional $102 connection fee and signed a contract with Motorola Cellular Services for at least one year.
People could not purchase one of the advertised cellphones and use an existing number nor could they arrange a contract with a different cellular network.
When interviewed by Commission investigators, the Managing Director of both companies had said special conditions had been included in previous advertising, but the companies stopped including them because they were "negative" and put people off.
He said no connection fee was mentioned in the advertisements because most people should know about the extra cost. He estimated that 40 to 50 percent of customers were first time buyers.
In fining each company $5,700, District Court Judge Barry Morris had said that their misleading advertising was: "quite clearly a come on, and used by the defendants to entice customers into their shops".
Justice Hugh Williams upheld Judge Morris' decision.
Justice Williams also said that the average shoppers would have thought they were required to pay one price to buy a cellphone but in fact were required to pay additional costs to make the cellphone work.
Commerce Commission Chairman Dr Alan Bollard said the focus of the Fair Trading Act is to promote healthy competition in New Zealand by ensuring that customers receive accurate information.
"If information is false or misleading, then consumers lose out, competitors are disadvantaged and competition is distorted," Dr Bollard said.
