Car Dealers Increase Prices For "Sales"

Media Release 2000/7

Commission believes many car dealers increase prices for "sales" and trade-in promotions

As part of the Commerce Commission’s action against false or misleading claims about cars, the Commission is highlighting what it believes is a common practice among car dealers—increasing prices for "sale" and trade-in promotions, and making false or misleading claims about reductions.

The Fair Trading Act prohibits false or misleading claims about prices. Commission Chair John Belgrave said that information from car dealers about each other and from consumers suggests that prices are frequently inflated for such promotions.

"Inflating prices for a promotion is an unacceptable practice," Mr Belgrave said. "If we find it in our surveillance of car dealers, then prosecutions are likely."

In a precedent case, the Christchurch District Court fined an appliance retailer $63,000 for several breaches of the Act, including making misleading claims about savings on sale goods.

As an example involving vehicles, a car might be offered for sale at $15,000, reduced by $3,000 with a trade-in. If, however, the car was available for $12,000 before the promotion, the claim that the car is reduced by $3,000 with a trade-in would be false or misleading.

A settlement concluded with Wellington car dealer Avery Motors a few days ago is illustrative of claims about sale prices.

Avery Motors advertised a Suzuki Vitara as "was $19,990, reduced to $16,930", but the car had been available from the same company for $14,990. The claimed "reduced" price was $1,940 more than the price at which the car had previously been offered for sale.

Avery Motors had the car available in its Johnsonville yard at "was $16,990 reduced to $14,990". It transferred the car to its Wellington city yard for what it called a clearance sale and increased the car’s price.

Mr Belgrave said that Avery Motors responded immediately to the Commission’s concerns and co-operated with the investigation.

In the settlement, Avery Motors has given signed undertakings: acknowledging that the claimed reduction was incorrect and misleading that it will ensure all its future advertising and other representations will be accurate to review its compliance and training programmes and to report back to the Commission on the review.

The Commission follows up all settlements and may take court action if a settlement is not honoured.

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