Court ruling a win for consumer rights

Court ruling a win for consumer rights and reminder to traders
Issued 9 September 2014

Release No. 29

The Commerce Commission says a recent precedent-setting Court of Appeal decision is a win for consumers and a reminder to traders tha¬t it is not good enough to hide important information in fine print, or where consumers need to hunt for it.

The case involved a dispute between carpet manufacturers Godfrey Hirst and Cavalier Bremworth. Godfrey Hirst alleged that Cavalier Bremworth’s claims about its “superb lifetime” carpet warranties were misleading. Godfrey Hirst alleged that claims about the warranties were misleading because the benefits of the warranties were significantly limited by terms and conditions contained in fine print or on a separate webpage.

Godfrey Hirst was successful with some of its claims in the High Court, but appealed to the Court of Appeal to seek guidance on matters dismissed by the High Court.

The Commission was granted leave to be heard in the Court of Appeal. The Commission’s General Counsel, Competition, Mary-Anne Borrowdale, said, “We became involved in the appeal because the consumer issues were of significant public interest.

“We have become increasingly concerned about the prevalence of misleading headline claims in advertising, especially online, where bold headline statements are made but they are then undermined by terms in the fine print. We want businesses and consumers to have a clear sense of what the ground rules are.”

The Court of Appeal decision clarified a number of important points, including that:

• All consumers are entitled to the protection of the Fair Trading Act, not just the knowledgeable, well-off or sophisticated.
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• Claims are made to all members of the target audience, except for “outliers” which includes those who are “ill-equipped” or “whose reactions are extreme or fanciful”.
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• When assessing whether a claim breaches the Fair Trading Act, it is the dominant message of the headline that is important.
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• Where there is a glaring disparity between the dominant message of the headline and the information qualifying it, the maker of the statement must draw the disparity to the consumer’s attention in the clearest possible way.
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• The Fair Trading Act will be breached where a claim has lured a consumer into “the marketing web” by misleading means. It does not matter that the consumer may come to appreciate the true position before the transaction is completed.
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“We are pleased to have the guidance that this judgment provides, which we think sets clear rules for traders and goes a long way to ensuring New Zealand consumers are protected from misleading trade practices,” Ms Borrowdale said.

The Court of Appeal ruling can be viewed on the Commission website: www.comcom.govt.nz/court-ruling-a-win-for-consumer-rights-and-reminder-to-traders/

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