26.11.2021

‘Tis the season … to comply with the Fair Trading Act

Retailers will be seeking to make the most of in-store trading reopening, particularly in Auckland.

This coincides with what is traditionally a busy time of year for retail, featuring well publicised ‘Black Friday’ and ‘Cyber Monday’ sales, as well as Christmas and Boxing Day promotions.  It is important that retailers remain vigilant to ensure promotional material complies with the Fair Trading Act 1986 (FTA).  The Commerce Commission (Commission) has issued a reminder of obligations imposed on businesses in trade and will undoubtedly be carefully scrutinising promotional material over the coming weeks and taking enforcement action where appropriate. 

Commission’s reminder of obligations under the Fair Trading Act

The FTA sets out an overarching prohibition on businesses engaging in conduct that is misleading or deceptive, or likely to mislead or deceive.  When it comes to advertising the price of goods or promotions, it is important that advertisements are clear and ‘sales’ are genuine.  The Commission’s most recent guidance, which can be accessed here, includes some key tips for retails including those set out below. 

THE COMMISSION’S TIPS FOR RETAILERS

  • Fine print should not be used to hide important information
  • Discounts must be taken off the usual selling price rather than the original price
  • Prices should only be compared to ‘like-for-like’ products or services
  • A sale is a limited opportunity to buy goods at a reduced price
  • ‘Clearance sales’ should only be advertised for clearing goods. These goods should not return to full price
  • A ‘special’ can only be used to convey something unusual
  • Shelf prices should match the checkout price
  • The range of goods for sale and the discounts being provided should be clearly outlined and not exaggerated

The impact of Covid-19

Retailers also need to take particular care in the current environment where shipping delays may affect stock availability or impact delivery timeframes to end customers.  Retailers should:

  • Carefully monitor stock levels to ensure that products advertised for sale remain available. This may require regular reviews of inventory online to ensure products are updated regularly and clearly marked if they are currently out of stock; and
  • Be wary about promises to deliver goods within a definite time period or prior to Christmas. Retailers should have sufficient certainty, with evidence available to back up such claims, before making those representations.

Where an order is not fulfilled within a reasonable time, customers may have rights under the Consumer Guarantees Act 1993, including the right to a refund of the purchase price.

Our comment

 The Commission notes that pricing is one of the most complained about areas under the FTA.  It has shown that it is actively monitoring this space and taking enforcement action where appropriate.  It has taken enforcement action in several cases, including:

  • Laying charges against Strandbags alleging that representations around discounted products and special prices were likely to mislead;
  • Warning Noel Leeming for making representations regarding the availability of stock and delivery timeframes which were not able to be met; and
  • Prosecuting Pak’ n Save Mangere in relation to discrepancies between the shelf price and checkout price for a number of items, with the Court imposing a fine of $78,000.

Retailers have unquestionably been hit hard this year.  The last thing a retailer wants for Christmas is an investigation from the Commerce Commission.  A breach of the FTA carries a maximum fine of $600,000 per breach for companies, while individuals can face a fine not exceeding $200,000.  In the rush of increased demand and sales, retailers must not lose sight of their obligations under the FTA. 

Our team is experienced in running compliance training seminars for FTA compliance, as well as assisting with inquiries and formal investigations in relation to promotional material.  If you have any questions, please get in touch with Kate Telford or Glen Holm-Hansen or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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