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Retailers reminded to avoid misleading consumers with exaggerated discounts

9 December 2015

The Commerce Commission is reminding retailers of their responsibilities as the holiday shopping season heats up.

"December is the busiest month of the year for retail sales and with online sales growing significantly, there is even greater competition in the market. Big sales and discounts are good for consumers and are an increasingly common feature of the retail industry in New Zealand. However, retailers need to ensure they are aware of their responsibilities under the Fair Trading Act. They need to make sure that advertised discounts offer a genuine saving and that their point of sale systems properly deliver the discount when the customer pays," said Commissioner Anna Rawlings.

The Fair Trading Act prohibits misleading and deceptive conduct and is designed to protect both consumers and competing businesses. Retailers need to take particular care when comparing a "special" or discounted price with a previous or "usual" price (such as "was $100, now $65"). Consumers could be misled if the retailer:

  • does not usually charge the "was" or “previous” price;
  • has inflated the usual price to exaggerate the discount or to attract customers by offering the goods at a discounted price;
  • uses an “RRP” for price comparison purposes, where the RRP is not genuine or is not the seller’s usual price;
  • sells products repeatedly and/or for extended periods at a promotional price but still claims it is a discounted price.

The Commission has previously warned and prosecuted retailers for misleading consumers in this way. In 2012, a supermarket company was issued with a warning for claiming customers could save "at least 20%" or "at least 25%" off all beer in a special promotion. However, it had been 32 weeks since the shelf price had been displayed for some products and the claimed saving of 20% off was misleading, as the product had been sold at a lower price for that period.

"We encourage retailers to take particular care when creating promotions, so that they deliver genuine discounts and charge correctly at the point of sale. For consumers, we advise they shop around and search online, to find out the usual pricing of goods before buying. That way, consumers will be able to know if a "special" price is really a good deal. Read reviews and seller feedback, to make sure you are dealing with reputable sellers and products. And if you are borrowing to fund the purchase, make sure you get good information about the total cost of the purchase once all repayments, interest and fees are included. These can add significantly to the price of a discounted purchase,” said Ms Rawlings.

Consumers who believe they have been misled by retail advertising or other sales practices can contact the Commission on 0800 943 600 or via their website.