Car dealer fined for "free" flight promotion

Media Release

Issued 29 August 2006/030

Car dealer fined for “free” flight to Gold Coast promotion

An Auckland car dealer who offered customers a “free” flight to the Gold Coast if they bought a car has pleaded guilty of breaching the Fair Trading Act.

The Commerce Commission is also prosecuting the promoter of the flights, which have been offered by over 50 New Zealand businesses. Most businesses offering the promotion were car yards, but it was also offered by bars, and by furniture and bed retailers.

The Court found that Tower Motor Group’s promotion was misleading because anyone wanting to use the “free” flight had to pay for inflated accommodation on the Gold Coast to qualify. The extra charge for the accommodation in effect meant customers were paying for the flight.

Tower Motor Group was fined $15,000 for breaching the Fair Trading Act and agreed to pay $1,000 to each of the three customers who bought cars during the promotion.

Customers responding to the advertising were not warned of the accommodation requirement when the promotion was explained to them. One customer told the salesman that she planned to stay with relatives on the Gold Coast, and he did not mention that paying for accommodation was part of the deal.

Commerce Commission Director of Fair Trading Deborah Battell said that promotions do affect the decisions people make when buying goods.

“In this case, the three consumers who complained to the Commission were left regretting the decision they had made on the basis of the misleading offer,” said Ms Battell.

Ms Battell said that companies running promotions or “free” offers needed to deliver on their promises.

“Free offers and promotions are designed to give companies a competitive edge,” said Ms Battell.

“Retailers need to understand that they are legally liable for any promotions they offer to customers.”

Tower Motor Group was one of 50 New Zealand businesses offering the “free” flight deal. The promoter who arranged the promotions for the businesses is also being prosecuted by the Commission and those proceedings are ongoing.

Ms Battell said that while Tower Motor Group had not been aware that the price of the accommodation was inflated, it should have realised that the flights were not truly “free”. Tower had paid only $71 for the tickets.

“To protect themselves from prosecution, companies must ensure that any promotions they offer are genuine and that consumers are getting what they are promised.”

“Our message to businesses is that if they are approached to take part in a scheme that seems too good to be true, they need to be sceptical and make proper enquiries, otherwise they may lose customer goodwill and face prosecution.”

Background

Tower Motor Group has two car yards, in New Lynn and Manukau. The retailers who participated in this scheme purchased “free tickets to the Gold Coast” from the New Zealand promoter for a minimal cost – in Tower’s case $71 plus GST. They then advertised to the public that these “free tickets” would be given away to them if they purchased specified goods or services.

ENDS

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