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Qantas fined $380,000 over misleading adverts

Issued 10 October 2006/053

Qantas fined $380,000 over misleading adverts

Qantas has pleaded guilty to 122 charges of breaching the Fair Trading Act and been ordered to pay $380,000 in fines and $15,860 in costs in the Auckland District Court.

Qantas is the second major airline to plead guilty to misleading the public in its advertisements. Air New Zealand was fined $600,000 for similar behaviour in June.

The Commerce Commission prosecuted Qantas after customers complained that they had to pay more than the advertised price for airfares because of extra ‘surcharges’ and ‘levies’.

In some advertisements the price was misleading because extra charges were not disclosed; in others, extra charges were imposed to cover normal operating costs, such as the cost of fuel, when they should have been included in the price.

Commerce Commission Chair Paula Rebstock says the Commission’s action against the airlines was important for competition.

“Without accurate advertising, customers can’t shop around and airlines have no incentive to compete and offer lower fares,” says Ms Rebstock.

Ms Rebstock said the judgment was also good news for consumers.

“New Zealanders told us they were tired of being misled about the cost of flying, and today’s judgment reinforces their right to get accurate information on prices.”

Qantas and Air New Zealand are now using all-inclusive prices in their advertising, says Mr Thorn. He says most other airlines and a number of major travel agents had also moved to advertising a single, all-inclusive price.

“The judgments in these airline advertising cases are a reminder to all advertisers that the price they advertise must be the price that customers actually pay,” Ms Rebstock says.

Ms Rebstock noted that large companies like Qantas and Air New Zealand have a high profile in the marketplace, and other businesses tend to copy their behaviour.

“Large companies have access to the best legal advice and should have compliance programmes in place to ensure they don’t break the law,” says Ms Rebstock.

“Smaller companies tend to follow the example set by larger corporations, and as a result of this action a number of transport companies have also moved to advertising all-inclusive prices.”

Background

The Commerce Commission laid 399 charges against Qantas for misleading advertising under the Fair Trading Act.

Today’s District Court ruling follows a guilty plea from Qantas on a total of 122 charges. The Commission withdrew the remaining charges.

The majority of charges relate to Qantas’s advertising of airfares in the New Zealand Herald, Dominion, Evening Post, Dominion Post and The Press from September 2001 to September 2002.

ENDS

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