Defunct computer retailer Gateway pleads guilty

Defunct computer retailer Gateway pleads guilty to breaching the Fair Trading Act: fined $21,000

A second conviction for false and misleading advertising has cost defunct computer retailer Gateway New Zealand Limited $21,000 in the Auckland District Court.

Gateway, which ceased operating in New Zealand in October and appointed a liquidator, pleaded guilty of breaching sections 10 and 13 of the Fair Trading Act.

This is the second time Gateway has breached the Act. The company was convicted and fined $21,500 in November 2000 for describing compulsory additional costs in small print only, in newspaper advertising.

It was only three months later that Gateway breached the Act with further misleading advertising.

In February, Gateway ran newspaper advertising promoting ex-demo and re-manufactured systems under the prominent heading "$999* and that's just for starters" showing a picture of a computer with a monitor, key board and mouse. However the monitor was not available with the system for $999. This representation breached sections 10 and 13(e) of the Act

Gateway also breached section 13(g) with the launch of its new Accessories page on the Gateway website with incorrect product pricing. A "dummy" price was used in place of the correct price and the website went live including the "dummy" price. It was accepted by Judge Unwin that it arose as a result of mistake.

Commerce Commission's Acting Chair Paula Rebstock said this case was a further reminder to traders that information or imagery in all forms of advertising, including newspapers and websites, must be accurate.

"When images are used to promote a product or deal, they must accurately represent what the trader is offering. Consumers are entitled to assume what they see or read in advertising is accurate," said Ms Rebstock. Ms Rebstock added that the fact that the website went live including the "dummy" price showed that Gateway had not checked the site properly before the launch, which shows poor compliance practise by Gateway which is disappointing considering the company had been prosecuted only three months earlier.

Judge Unwin's $21,000 fine, plus $430 court and solicitor's costs, comprised:

* $10,000 on the section 10 charge, together with $300 solicitor's costs, and $130 court costs on that charge;

* $2,500 on each of the four section 13(e) charges in respect of newspaper advertisements;

* $1,000 on the section 13(g) charge concerning the Website advertising.

Ends

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