Commerce Commission continues active pursuit of breaches of the Fair Trading Act

The Commerce Commission has been busy this quarter with a further run of high profile wins and out-of-court settlements from companies found to have breached the required standards of consumer law.

The Commerce Commission has been criticised in the past for lacking "teeth" in its enforcement of competition and consumer protection laws. Clearly, this label has passed its used-by-date. In addition to the Commission's recent record penalties in cartel cases (reported in previous issues of Commercial Quarterly ), it has also been successful in achieving high fines and payouts in a series of actions brought under the Fair Trading Act 1986 (FTA). In October:

• Electricity retailer Energy Online was found in breach of the FTA for misleading potential customers over a "price freeze" advertising campaign1. In the campaign customers were told that the "energy portion" of their electricity bills would not be increased over a specified period. However, Energy Online did pass on increases to its customers for electricity distribution and its own overheads during the specified period. The District Court agreed with the Commission that the overall impression of the price freeze offer was that prices would not go up at all. Energy Online was fined $140,000 and over $800,000 is to be refunded to its customers in compensation.
  
  
• Qantas pleaded guilty (and was fined $380,000) for breaches of the FTA over air travel advertisements from September 2001 to 20022. The Commerce Commission maintained that in each advertisement Qantas had made a false or misleading representation about the price of travel by either:
  
  
  • not disclosing extra charges; or by
    
    
  • using extra charges to cover items that should have been treated as normal operating costs and included in the headline price.
    
    
• In the largest out-of-court settlement under the FTA, Telecom has agreed to return approximately $3.3 million to its customers. Telecom accepts that it was in breach of the Act in so far as customers were being charged under both their old call plans and their new call plans on the day the plans were being swapped over.
  
  
• Carter Holt Harvey pleaded guilty to breaching the FTA by selling timber that did not meet the grade claimed on the packaging between July 2000 and November 20033. The company was fined $900,000.
  
  
• Following on from the Commission's previous successful cases against the BNZ and ANZ National Bank, Westpac is the latest bank to plead guilty to breaches of the FTA for failing to disclose fees charged for overseas currency transactions on its credit and debit cards4. Westpac was fined $570,000 by the District Court and has agreed to pay $4.5 million in compensation to its customers who made foreign currency transactions on their cards.

 

1 Commerce Commission v Energy On Line Ltd (Unreported, 16 October, 2006, Napier District Court)

2 Commerce Commission v Qantas (Unreported, 10 October 2006, Auckland District Court)

3 Commerce Commission v Carter Holt Harvey Ltd (Unreported, 12 October 2006, Auckland District Court)

4 Commerce Commission v Westpac Banking Corporation Ltd (Unreported, 29 September 2006, Auckland District Court, CRN 5004500677-782)

Enquiries and information

For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.