NZ Commerce Commission Reports Jewellery Trader Convicted And Finded Over Misleading Advertising

LAWFUEL – The Legal Newswire – In the Auckland District Court yesterday Carrerabenz Diamond Industries Limited pleaded guilty to breaching the Fair Trading Act after it misled customers over the valuation prices of its jewellery.

The Auckland company, the principals of which live in Queensland, was convicted of 21 breaches of the Act and fined $49,500 with costs of $520.

In July and August 2003 the company held jewellery sales at hotels in Auckland and Wellington. In television and newspaper advertising the company claimed the jewellery was up to 80% cheaper than independent valuation prices and prices charged by major retailers. However the valuation prices shown were based on valuations made for insurance purposes in Australia. The company had then created the valuation figures shown in the advertising by converting the Australian valuations into New Zealand dollars and adjusting them for GST and taxes. Price tags on the jewellery and valuation certificates in the company’s name also quoted the valuation price in New Zealand dollars.

The company had expected to earn approximately one million dollars from the sales in Auckland and $400,000 from the sales in Wellington.

“Customers were led to believe they were purchasing jewellery which was worth the values advertised and that they were making large savings buying it at the sale price,” said Stuart Wallace, Acting Director of the Commission’s Fair Trading Branch.

The Commission had received complaints from customers who had bought jewellery and from other retailers about the use of valuation prices in the advertising, and the authenticity of the certificates provided to customers. In the case of one customer, a ring was valued by an independent New Zealand valuer at considerably less than the company’s valuation price and slightly below the actual price paid.

“Experts we consulted told us the value of diamonds and diamond jewellery is generally higher in Australia than in New Zealand so it was misleading for the company to value an item by converting the Australian valuations to New Zealand dollars.

“This kind of misleading behaviour not only impacts on consumers, but it also affects New Zealand businesses’ ability to compete in the marketplace,” Mr Wallace said.

“Traders must ensure when quoting valuation prices that they are relevant to the market in which the goods are being sold. Representations as to a saving to be made must be actual savings,” Mr Wallace said.

Background

The Fair Trading Act Section 13 (g) of the Fair Trading Act 1986 relates to making a false or misleading representation If the Commission decides that the labelling or representations made are likely to have breached the Act, it can take a range of enforcement actions including issuing a warning, entering into a settlement on the basis of undertakings or taking court action either through the criminal or civil jurisdictions. Court penalties for breaching the Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.

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