Kathmandu was fined $28,000 plus costs in the Auckland District Court today for breaching the Fair Trading Act by advertising goods as being "on sale" when they had been available at the discounted price for months prior to the sale and, in some cases, when they were also available at the same "sale" price afterwards.
Kathmandu had advertised various items of clothing as being available at a discount of up to 50 to 60% off normal retail price during their nationwide sales. However, some of these items had already been available in store at this reduced price; the Astra jacket in "Moonlight" was advertised in the Easter Sale 2004 at the discounted price of $79.95 but was already available at this price from 29 January 2004 until 23 August 2004.
In her summing up, Judge Kiernan noted that although Kathmandu has now changed the way it displays its products in store, clearly differentiating between those items on sale and those already discounted, it had failed to respond to previous approaches by the Commission on this matter.
Commerce Commission Director Fair Trading Deborah Battell welcomed the fine and said it sent a sharp warning to all traders to exercise care when advertising items as part of a sale. "Kathmandu failed to put in place proper procedures to differentiate between goods that were discounted for the sale period and those that had already been offered at the reduced price because they were discontinued lines. Consumers were led to believe that the advertised deals were available for a limited time only, when the price was, in fact, the normal price.
"Kathmandu's sales are extremely popular and the advertising is very well known. We all love a bargain, and the words "sale" and "in-store special" are designed to appeal to this desire. It is fine to use the words when the discounts are real, but it is misleading to use these terms when there is no difference in price. In addition, consumers want to know whether something is cheap because its style or colour has been discontinued.
"Businesses also need to note that the Commission will prosecute companies when they fail to act after being advised of Fair Trading Act issues. Kathmandu had been contacted by the Commission about pricing issues on two previous occasions."
Background
Section 13(g) of the Fair Trading Act 1986 says that you must not make false or misleading representations as to the price of any goods or services.
The offending concerned representations made during three major sale periods from 26 March 2004 to 27 September 2004. The items in question were the Astra jacket, the Toscana jacket, the Everest vest and Shetland Jumper, all in a variety of colours.
Kathmandu were fined $4,000 plus court costs of $130 for each offence.
