Warning to all retailers "free" still means free: Harvey Norman settlement
24 July 1998
The Commerce Commission is warning all retailers that potentially misleading "free" promotions are occurring again, and to avoid risk of breaching the Fair Trading Act free must mean no extra costs.
Commission Fair Trading Manager Rachel Leamy said that the Commission has accepted a settlement with Harvey Norman Stores (N.Z.) Pty Limited over the promotion of a "free extended warranty to the year 2003" on a model of computer printer.
Ms Leamy said that, in the Commission's view, Harvey Norman risked breaching the Act by increasing the price of these printers for the promotion.
The Commission's investigation showed that before the promotion Harvey Norman had sold this model of printer for between $799 and $849. During the promotion the printer was offered for $899 including a "free extended warranty to the year 2003".
Harvey Norman has given signed undertakings, including that it:
- "will not, at any time, inflate the price of any
goods or services offered by it, to cover the cost of any
associated free gift, item, service or extended
- "will implement a written compliance programme to
ensure its future compliance with the Fair Trading
- will report back to the Commission within three months.
"This is not a new interpretation of the law, and it is common sense - free means no extra cost to the customer," Ms Leamy said. "But in the last three months we received 69 enquiries about problems with free promotions."
"The Commission's enforcement action so far should be seen as a warning to all retailers. We have now accepted settlements from two businesses that allegedly increased prices for free promotions, and we warned retailers using free airfare promotions that high accommodation costs had to be clearly disclosed.
"If problems with free promotions do not stop, then the Commission will have to consider taking stronger enforcement action against future alleged breaches."
The law: The Fair Trading Act prohibits misleading or deceptive conduct and false or misleading representations. Section 13(g) specifically prohibits false or misleading representations about the price of any goods or services.
Enforcement: Anyone - be they a customer, competitor, the Commission or another party - can take their own action under the Act. The Commission can investigate possible breaches and, after investigating, decide to take no further action, issue a warning, accept a settlement including signed undertakings of how behaviour will change or take court action.
Penalties: Courts can impose fines of up to $100,000 against an organisation, $30,000 against an individual and can impose a wide range of orders and injunctions.
Media contact: Fair Trading Manager Rachel Leamy
Phone work (04) 498 0908
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its web site www.comcom.govt.nz