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Misleading Representations Cost Star Corp. $51,120

Media Release

Issued 7 June 2002 /061

Misleading representations cost Star Corporation over $50,000

Star Corporation Limited was fined $48,000 plus court costs of $3,120 in the Waitakere District Court this week for misleading conduct regarding false statements about two mobile telephone directories. Star Corporation pleaded guilty to 24 breaches of the Fair Trading Act.

Star Corporation publishes the "Auckland Business and Mobile Directory, and the "Business and Mobile Phone Directory", which covers Waikato to Wellington. These directories are similar to the Yellow Pages published by Telecom New Zealand Limited.

A Commerce Commission investigation revealed that Star Corporation made several false statements as to the extent of distribution, the volume of the print run, the volume of a previous print run and the variety of retail outlets that were to stock the directories.

Judge David Mather emphasised that companies have to accept responsibility if misrepresentations are made, and that they cannot shift the blame to middle management or team leaders.

As part of its sales pitch, Star Corporation claimed minimum print runs of 40,000 for each of the directories, when approximately only 2,000 were ever produced. The directories were distributed to advertisers or if requested by interested parties or potential advertisers.

In its investigation, the Commission contacted seven of the recognised national cellphone outlets and not one had heard of, or had stocked, either of the directories.

"The false statements bolstered the stature of the intended publication, giving it undeserved authority," said John Belgrave, Chair of the Commerce Commission.

"The fine imposed will send a very strong message to all traders that false claims about their products will not be tolerated by the courts. Directory publishers, in particular should take note. The Commission receives a steady stream of complaints about the industry, and will continue to prosecute offenders."

In sentencing, Judge Mather took into account the net profit returned as a result of the misleading conduct and added a further penalty component to the fine. Star Corporation pleaded guilty to 22 charges of breaching section 13 and two charges of breaching section 11 of the Fair Trading Act. Star Corporation was fined $2,000 plus $130 court costs per charge. The total fine imposed was $51,120.

The court accepted that the 24 charges resulting from the Commission's 14 week investigation, between January to April 2000, were representative of Star Corporation's conduct over a longer period. Background A Commission investigation found that in its soliciting for subscribers and advertisers in the Auckland Business and Mobile Phone Directory, Star Corporation made false representations by:

* stating that every business from Orewa to Bombay would be in the directory in some capacity;

* stating that there was a proposed print run for the directory of 40,000 copies;

* that the previous print run for the 1999 edition totalled either 100,000, 60,000 or 40,000 copies when there was, in fact, less than 2,000;

* that the directory was being stocked and sold through cellphone outlets, and major book stores and stationery shops; and

* that the company, Star Corporation, was in negotiation with The Warehouse to stock and sell the directory.

The Commission has previously warned Star Corporation for misleading representations in 1999.

ENDS

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