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Fair Trading Act breach

6 December 2004-05/071

Fruit and produce wholesaler admits Fair Trading Act breach in settlement with Commerce Commission

Fruit and produce wholesaling and marketing company Freshmax Limited has admitted it breached the Fair Trading Act in a settlement with the Commerce Commission, following an investigation into the way in which it has been invoicing its grower suppliers using its Auckland Wholesale warehouse.

The investigation found that in November 2001, Freshmax introduced a warehousing fee of 50 cents per unit of produce through its Auckland wholesale warehouse for consignment trading, but failed to adequately disclose this to growers, simply deducting this fee off the stated selling price for the produce. The fee was not separately disclosed on the statement provided to growers.

Director of Fair Trading Deborah Battell said that although the Freshmax Terms and Conditions Relating to Suppliers allowed for the deduction of site handling fees, the warehouse charge was not specifically introduced into the Terms and Conditions until September 2002, and not notified in writing to growers until November 2003.

"In the Commission's view, growers could have been misled about the price of the service they were providing as grower statements did not refer to these fees. Although Freshmax has stated its sales representatives were instructed to inform growers of the charge verbally, the Commission considers this was not sufficient notice. Nor did the statements indicate that the stated selling price for the grower's produce was the price after deduction of the fee."

Ms Battell said this case sent a clear message to businesses in general that customers must be formally advised if there are any changes to the costs of services.

"Additional charges should be itemised on customer statements and should not just be slipped onto an invoice without formal warning or explanation," she said.

As part of the settlement reached with the Commission, Freshmax has undertaken to review its own compliance programme on the Fair Trading Act, and to fund an industry wide seminar on compliance with the Act for members of the produce industry.


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