Misleading Christmas deal results in $145k fine

Issued 14 March 2017
Release no. 90

Misleading Christmas deal results in $145k fine for mobile trader

Mobile trader Sales Concepts Limited has been fined $145,000 in the North Shore District Court after pleading guilty to 10 charges under the Fair Trading Act 1986 relating to its ‘Christmas Deal Bundles’.

The North Island door-to-door business sold bundles of electronic goods on layby to consumers between October and December 2015, with the promise that the goods would be delivered by Christmas 2015 if they were up to date on their payments. In fact, customers would only receive one of the goods prior to Christmas 2015, with the remainder being delivered when the customer had paid in full.

In sentencing Sales Concepts, Judge Sinclair said it was clear and obvious that customers were intending to use the goods as Christmas presents and that the company would have been aware of the misrepresentations made by staff.

“There was a culture of obtaining sales with little regard to the impact on customers. There was a lack of compliance procedures in place to prevent this from occurring,” Judge Sinclair said.

“I cannot accept the submission that the defendant company was not aware of the representations,” she said. “This was not a large company – it cannot abdicate responsibility and hide behind the actions of a reported few aberrant sales staff.”

Further charges related to Sales Concepts making misleading representations about the products being made in New Zealand, the total price of the Christmas bundle, the inclusion of a delivery fee and customers’ cancellation rights. Sales Concepts also failed to comply with the disclosure requirements for uninvited direct sales agreements as a number of the agreements were not dated, had illegible handwritten contractual terms or unclear descriptions of the goods to be provided.

Commerce Commissioner Anna Rawlings said Sales Concepts’ staff had misled its customers in a number of ways.

“Traders are responsible for what their employees do. Frontline sales staff need to be properly trained to understand their obligations under consumer laws. The incentive to make a sale must never compromise the trader’s obligation to provide clear and truthful information to its customers.”

“Sales Concepts stopped its misrepresentations and agreed to refund its customers after the Commission intervened in December 2015. But its Christmas sales practices had already caused confusion and distress at a time of year when many people come under financial pressure,” Ms Rawlings said.

Warning letter for likely unsubstantiated claims about radiation chip product
Sales Concepts was also issued a warning letter in July 2016 for making what the Commission considered to be unsubstantiated representations about its ‘Envirochip’ products. The company claimed that the use of everyday electronic devices resulted in harmful illnesses (such as cancer and infertility in males, children and pregnant women) caused by radiation. It claimed that their products could protect against these effects.

This warning letter is available on the Commission’s website.

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