The TV Shop to pay $1.104m for conduct that included misleading customers
The District Court has ordered Brand Developers Ltd, trading as The TV Shop, to pay a $1,104,000 penalty for a range of conduct, including company staff members posting positive product reviews without disclosing their affiliation with the business.
In some cases, The TV Shop’s employees also posted positive reviews, that would have misled consumers, despite not using the product in question. The Commission also uncovered evidence the company, which is behind well-known brands such as Thin Lizzy and Transforma Ladder, asked friends and family to leave reviews.
In addition, The TV Shop systematically removed some negative reviews from its website – reviews with one, two or three stars would not be published unless the customer responded to a follow up email from the company. No low rating reviews were published at all for a period during 2020.
Commerce Commission Deputy Chair Anne Callinan says online reviews are increasingly relied on by Kiwis looking to buy products and it is unacceptable to post or manipulate them in a way that misleads people.
“When you have staff post reviews without disclosing their affiliation, or when you remove negative reviews, you are effectively tricking potential customers,” Ms Callinan says.
“My message to businesses is simple – don't pull the wool over peoples’ eyes.
“Kiwis should be able to trust online reviews are genuine and free of manipulation.”
In her sentencing decision, Judge Belinda Sellars KC called The TV Shop’s offending in relation to online reviews “deliberate and systematic”.
Its managers and executive were aware of, and at times directed, the conduct, she added.
“It is clear from the evidence that BDL made concerted and repeated efforts to improve the online rating and reviews of its products and thereby deliberately mislead consumers,” Judge Sellars found.
“The methods that staff were instructed to follow for posting reviews were designed to circumvent Product Review and Google’s processes to stop non independent reviews.”
Earlier, in a December judgment, the District Court also found The TV Shop systematically misled customers about their rights under the Consumer Guarantees Act.
The company had policies and instructions in place that meant call centre staff suggested customers had no rights to refunds or remedies beyond a ‘30-day Money Back Guarantee scheme’ or ‘risk-free trial’ if customers thought products were broken, faulty or mis-advertised.
At sentencing, Judge Sellars KC found: “Representations made by a business about the CGA are extremely important to consumers given the protective nature of the legislation.”
In its December judgment, the court also found representations about “free” or “bonus” items were misleading.
The TV Shop’s popular Air Roaster Pro product was advertised for three years as including an accessory pack, described as a “free” or “bonus” item, or “special offer”.
In reality, the product was always sold with the accessory pack and customers were not getting anything extra.
A copy of Judge Sellars KC’s sentencing decision is available.
Separately, in 2022 The TV Shop was fined $123,500 after failing to comply with extended warranty disclosure requirements. In 2015, the business was fined $153,000 for misrepresentations that a ladder being sold or advertised had a certification when it did not.
The Commission filed further proceedings against The TV Shop in February, alleging it engaged in unconscionable conduct by utilising exploitative and misleading practices when selling high value products to consumers.
Background
Online reviews
Online reviews provide an increasingly important source of information for consumers contemplating the purchase of goods and services.
Reviews must be genuine and presented in a way that does not mislead the reader about the overall message intended by the reviewer.
The Commission has published guidance to assist businesses to meet their legal obligations when they collect or publish customer reviews.
Rights under Consumer Guarantees Act
Under the Consumer Guarantees Act, products are guaranteed to be fit for purpose and of acceptable quality. These guarantees are implied by law. They do not need to be written into a consumer contract and they apply in addition to any written warranty provided by a manufacturer or retailer.
In addition, manufacturers and retailers cannot contract out of the guarantees that apply to them when goods are ordinarily acquired for domestic or household use, regardless of the terms and conditions which a business has in place. It is an offence under the Fair Trading Act to mislead consumers about their rights, including their rights under the Consumer Guarantees Act.
There is more information about consumers’ rights under the Consumer Guarantees Act on the Commission's website.
Online sales practices
Consumers increasingly shop online and rely on claims businesses make on their website about goods and services. In many cases, consumers cannot establish for themselves if these claims are accurate. Claims about the availability or popularity of goods or services can influence a consumer to make a purchase. As with all claims that businesses make, claims made online must be clear, accurate and unambiguous and businesses must be able to substantiate them – back them up.
The Commission has published guidance to assist businesses to meet their legal obligations when they carry out online sales practices.