Hill & Stewart guilty of 14 charges under Fair Trading Act
30 November 2007
An appliance retailer has been found guilty of charges under the Fair Trading Act 1986 for making claims that prices were interest free when in fact the prices were more expensive than the cash prices.
Hill & Stewart Appliances Limited (now owned by JB Hi-Fi Group (NZ) Limited) was sentenced today in the Auckland District Court to 14 charges including:
- 11 charges relating to advertising prices of products as being interest free when in fact they were more expensive than the cash prices;
- two charges relating to false representations about the cost of a washing machine;
- one charge relating to a representation that washing powder was supplied free with the purchase of a washing machine when in fact the cost of the powder was incorporated into the price of the goods.
The Auckland District Court ordered Hill & Stewart to pay a fine of $75,000 plus $2,070 in costs.
Commission Chair Paula Rebstock noted that Judge Mathers, in sentencing Hill & Stewart, described the company's actions as careless and widespread, affecting all 11 stores.
"This conviction should send a very clear signal to the retail industry. It is now well established that if 'interest free' claims are to comply with the Fair Trading Act, then the prices for those products must be the same as the cash prices", Ms Rebstock said.
During 2005 and early 2006 Hill & Stewart and Appliance Connexion Limited ('ACL') advertised interest free finance for items purchased from Hill & Stewart stores and 100% Your Electrical Store outlets. The interest free deals were advertised widely on television and radio, in newspapers, on the internet and in mailers.
Commission investigators established that Hill & Stewart offered a cash price which was lower than its advertised interest free price on goods for sale throughout its branch network.
"The price of the goods to consumers who purchased items on credit terms was significantly higher than the cash price," said Ms Rebstock
As an example, Ms Rebstock said the Commission purchased a fridge freezer from the Takanini branch of Hill & Stewart in February 2006 for a cash price of $890.00 however the advertised interest free price was $999.95. The cash price was not available on the interest free terms.
"The offer of interest free and easy payment terms may often be the deciding factor in a consumer's decision to purchase goods. Misleading claims that products are 'interest free' may induce consumers to buy without first shopping around to find the best deal. Because of that, traders making such claims may also gain an unfair advantage over other traders."
Hill & Stewart further breached the Fair Trading Act in relation to the difference in the advertised price of a Fisher & Paykel washing machine in the ACL mailer and the Hill & Stewart in-store price. The washing machine was advertised in the mailer for $1179.95. However, in store it was $20.00 more, at $1199.95.
Ms Rebstock says: "False or misleading advertising entices customers to the advertiser's business. Traders must ensure that the product is available in-store at the advertised price otherwise they will be breaching the Fair Trading Act."
A 'free gift' of Persil washing powder also got the company in hot water. Between the period 9 November and 17 December 2005 Hill & Stewart advertised an in-store 'free' gift of a 6kg packet of Persil washing powder when a customer purchased a Fisher & Paykel washing machine or tumble dryer. However Commission investigators were told that if the 'free' Persil was not wanted a further $20 would be deducted from the cost of the product.
Ms Rebstock says: "Free must mean free and the price of products must not be increased to cover the cost of something described as a free offer."
Hill & Stewart Appliances Limited changed its name to JB Hi-Fi Group (NZ) Limited on 7 March 2007; however it still operates 11 stores in the greater Auckland area under the Hill & Stewart brand.
Hill & Stewart has five previous convictions for offending against the Fair Trading Act and Credit Contracts Act in 1999.
At the relevant time of the offending Hill & Stewart had a business relationship with the Appliance Connexion Limited ('ACL'). ACL owns the trademark "100% Your Electrical Store' which it franchises to 75 members nationwide, and which it uses to market products sold by its members, including Hill & Stewart.
The Fair Trading Act prohibits misleading or deceptive conduct and false or misleading representations. Section 13(g) specifically prohibits false or misleading misrepresentations about the price of any goods or services. Only the courts can decide if a representation has breached the Fair Trading Act.