A prominent jewellery company in New Zealand recently faced a substantial fine of $169,000 from the District Court for violating the Fair Trading Act. The case centered around a consumer who, after purchasing a bracelet on sale for $1803.00, discovered an undisclosed extended warranty cost of $149.00 on the receipt. This omission led to legal consequences for the company, emphasizing the importance of transparent pricing and proper disclosure.

Hidden Costs and Legal Ramifications: The consumer had not been informed about the additional extended warranty and had not consented to its purchase. The lack of clarity regarding the warranty’s terms further compounded the issue. Consequently, the company was found liable for making false and/or misleading representations about the bracelet’s price and for inadequately presenting its extended warranties.

Key Factors in the Decision: The court considered various factors in reaching its decision, including:

1. Failure to Disclose: The staff member’s failure to disclose the inclusion of the extended warranty in the bracelet’s price misled the consumer, preventing an informed decision.
2. Consumer Impact: The company had sold a significant number of warranties in the preceding 12 months, raising concerns about consumers unknowingly paying for warranties without proper knowledge or choice.

Fair Trading Act Provisions: The Fair Trading Act prohibits false or misleading representations about goods or services, encompassing aspects such as price, quality, and characteristics. Concealing additional costs from consumers can be viewed as a violation, leading to legal consequences.

Extended Warranty Compliance: Offering extended warranties requires adherence to the Fair Trading Act. If a company decides to provide extended warranties, it must clearly outline specific details on the warranty’s front page, including:

• A comparison between the Consumer Guarantees Act and the extra protections offered.
• A summary of the consumer’s rights and remedies under the Consumer Guarantees Act.
• All terms and conditions, such as duration, expiry date, and the payable price.

Consumer Protections: Once an extended warranty agreement is established, consumers have a five-working-day “cool-off” period to reconsider and cancel the agreement if desired. Failure to comply with these regulations can result in fines imposed by the Commerce Commission, with each breach potentially costing $10,000 for individuals and $30,000 for companies.

Legal Guidance for Companies: Given the significant financial implications of non-compliance, companies offering extended warranties should seek legal advice to ensure they are fulfilling their obligations under the Fair Trading Act. Clarity and transparency in pricing protect both consumers and businesses from potential legal repercussions.