Parallel importer snapped over price discrepancies

An Auckland parallel importer was fined $3,000 in the Auckland District Court on Thursday for advertising digital cameras at cheaper prices than they were available in store.

Etop Limited and its director Chen Hao Tu (also known as Tony Tu) were found guilty and fined for breaching the Fair Trading Act by advertising certain products at one price but selling them for anything up to $60, or 9%, more in-store. The products were advertised in the New Zealand Herald - Weekend Edition, Trade & Exchange and on Etop's own website. Customers would only have found out the true cost of the cameras when they came to pay for them.

When challenged by the Commerce Commission over this behaviour, Etop and Mr Tu claimed no knowledge of the Fair Trading Act, even though Mr Tu had been previously warned about his obligations under the Act.

"The high profile print campaign run by Etop was designed to entice customers into the store through what appeared to be very good prices", said Director Fair Trading Deborah Battell. "It was only when the customers came to pay at the end that they would have found out the cameras were more expensive.

"The Commission considers Etop's conduct to be a serious breach of the Fair Trading Act because parallel importers compete purely on the basis of price. Advertising goods at even lower prices and then charging higher prices in-store is misleading and anti-competitive, removing the potential for other businesses to properly compete on price.

"Etop also tried to argue that its prices went up after the advertising deadlines had passed. It is the duty of all businesses to ensure the prices they advertise are current."

Background

Etop Limited and Chen Hao Tu were convicted of breaching ss 10, 13(g) and 19(2) of the Fair Trading Act 1986. The offending occurred between November 2004 and January 2005. Mr Tu, as director of XP Computer Warehouse Limited, had previously received a compliance advice letter and warning letter in 2003 over alleged breaches of the Fair Trading Act.

Section 10 says that no person should engage in conduct that may mislead as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.

Section 13(g) says that no person should engage in false or misleading representations with respect to the price of any goods or services.

Section 19(2) says that any person who has advertised goods or services at a specified price shall offer those goods or services at that price for a reasonable period.

Parallel importing allows retailers, wholesalers and other parties to obtain goods subject to intellectual property rights directly from licensed or authorised overseas sources, rather than dealing with local suppliers, licensees or agents. In doing so, parallel importing allows for competition between sources of the same or similar goods.

The price differences between selected goods are outlined below: