Quantum Prestige Limited Fined $17,500
Issued 14 September 2001/97
Substantial Untruths Told In Advertising: Quantum Prestige Limited Fined $17,500
A "substantial untruth was contained in all the advertising" offered as evidence against Quantum Prestige Limited said Judge Doogue in the Auckland District Court today.
The Auckland based company was found guilty on 10 counts of breaching sections 11 and 13 of the Fair Trading Act over promotion and advertising of an "As Seen on TV" shopping voucher offer.
Judge Doogue went on to say the offending was "deliberate or at least grossly reckless" and that "culpability is high in this case." The fact the advertising appeared on national television gave the advertisement a "very wide reach" and "published to a much greater extent than if they were in a newspaper with limited circulation."
Judge Doogue added "modest efforts were made to change the obnoxious and offending content" of the advertisements.
The shopping voucher offer appeared in Quantum Prestige's advertising for two products, Instant Touch Lights and Pest Xit Duo, a pest control device which was available through Quantum Prestige's five "As Seen On TV" retail outlets and through a national call centre.
Quantum Prestige used extensive television advertising last year to promote "free" shopping vouchers with purchases of the two products. In doing so it misrepresented that $40.00 and $120.00 worth of the "As Seen on TV" shopping vouchers offered with the product were "free" when they were not.
Commerce Commission's Director of Fair Trading Deborah Battell explained: "It is misleading to claim that the customer will receive either $40 or $120 worth of shopping vouchers "free", when in fact the customer has to spend substantial further sums to redeem them.
"The use of the words "Special Conditions Apply", which appeared on some of the advertising, did not save Quantum Prestige as the conditions radically changed the nature of the offer and the impression created in the advertising," added Ms Battell.
Judge Doogue agreed that changes made to the advertisement after complaints from customers "were not a dominant or striking endorsement to the advertisement."
Judge Doogue added that the use of the worlds special conditions apply "didn't convert the unlawful behaviour into lawful behaviour."
The conditions demonstrated that the vouchers were not "free." For example, in order to redeem the $40 worth of vouchers offered with the Instant Touch Lights, a customer would have to spend $199.95 in total, including $39.95 for the lights and $160 on subsequent orders before they could use the vouchers. To redeem the $120 worth of vouchers received with the $119.85 Pest Xit Duo product, a customer would have to spend a further $480.
Today's prosecution is not the first time Quantum Prestige has come to the attention of the Commerce Commission. The Commission entered into a settlement with the company in September 1999 over misleading advertising claims concerning the benefits of MotorUp Engine treatment. As part of that settlement, Quantum Prestige undertook to review its compliance programme.
"The compliance programme does not appear to have been fully implemented, adhered to or understood by Quantum Prestige staff," said Ms Battell.
"What is even more disappointing is that Quantum Prestige had had every opportunity to ensure that it complied with the Act. We had spent a lot of time assisting the company through the Commission's Major Trader Programme which focuses on educating traders and working with them to develop effective compliance programmes. As a result, we were left with no option but to prosecute."
Quantum Prestige was fined $1,750 for each of the 10 breaches plus $350 solicitors costs and $130 court costs. He awarded the solicitors costs "as a substantial amount of work has been necessary to bring it before the court."
Quantum Prestige, who owned "As Seen On Television" has ceased trading but the Commission has been advised that some of the business assets have been bought out by Quantum Global New Zealand Limited.