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Christchurch car company pleads guilty to FTA Breaches

Christchurch car company pleads guilty to Fair Trading Act breaches

A Christchurch based car company has pleaded guilty to 55 charges of breaching the Fair Trading relating to sales made on Trade Me.

Morrison Car Company has been fined a total of $45,000 and ordered to pay $1,000 court costs in the Christchurch District Court today after pleading guilty to charges of bidding on its own auctions on Trade Me and failure to display or provide Consumer Information Notices with the vehicles.

“Motor vehicle traders have legal obligations whether they are selling from a car lot or selling online via sites like Trade Me. Failure to comply can negatively affect consumers and also other businesses that are doing the right thing,” said Stuart Wallace, Commerce Commission Competition Branch Manager.

In sentencing Morrison Car Company Judge Farish rejected as “implausible in the extreme” the company’s explanation that they were bidding on behalf of actual customers. Judge Farish also noted the significant effect of the offending particularly on Trade Me which was a real victim of the conduct.

Between 2005 and 2009 Morrison Car Company listed vehicles for sale on Trade Me via two accounts ‘m_c_c’ and ‘mcctrades’. From August 2007 around three quarters of the 200 vehicles listed for sale by the Trade Me account ‘m_c_c’ were offered with a $1 reserve. However, the Commission’s investigation found that for at least 39 of those auctions the cars were never available for purchase at the $1 reserve price as Morrison Car Company staff placed 344 bids on the auctions themselves, artificially increasing the price of the cars. This type of bidding is known as shill or ghost bidding and is banned by Trade Me.

“It is not uncommon for sellers on Trade Me to list items with a $1 reserve. To avoid the risk of breaching the Fair Trading Act, sellers must be prepared to sell the item for $1 if no other bids are received for the item. Sellers cannot artificially raise the price themselves. Trade Me will investigate if shill bidding is suspected. Consumers should be wary when high value items are listed with a $1 reserve,” said Mr Wallace.

Additionally, none of the cars offered for sale via Trade Me included the display or access to a Consumer Information Notice (CIN) as required to comply with the legislation and Trade Me’s terms and conditions. In addition CINs were not provided to purchasers.

Trade Me disabled both the ‘m_c_c’ and ‘mcctrades’ accounts for breaches of Trade Me’s terms and conditions.

Background

Shill or ghost bidding
This is when artificial bids are placed on an item to artificially increase its price or desirability. Shill bidding also happens when someone a seller knows bids on the seller's item. This includes family members, friends or employees. Shill bidding is banned by most internet auction sites including Trade Me. Any suspected breaches of Trade Me’s terms and conditions should be reported directly to Trade Me.

Imported as Damaged
All imported vehicles must be certified before they can be registered for use on New Zealand roads. Used imported vehicles are inspected at the border. Any obvious defects or damage are detailed in writing, photographed and recorded with the New Zealand Transport Association (NZTA) while the vehicle itself is stickered to alert the importer that the vehicle was ‘imported as damaged’.

‘Imported as damaged’ information is held at NZTA and is readily accessible to motor vehicle traders and the general public through websites such as motochek, motorweb and autofinder. If a car has been imported as damaged this must be shown on the Consumer Information Notice.

A fact sheet on Consumer Information Notices is available on the Commerce Commission’s website at www.comcom.govt.nz/used-motor-vehicles

Related actions
On 25 August 2010 the Commission wrote to approximately 2500 registered motor vehicle traders reminding them of their obligations in relation to the CIN Regulations and compliance with the Fair Trading Act.

The Commission also published a warning for Trade Me advertisers who sell more than six motor vehicles within a twelve month period on 20 August 2010. Legislation identifies a person who sells more than six motor vehicles in a 12 month period as a motor vehicle trader who must be registered. This media release is available at www.comcom.govt.nz/fair-trading-media-releases/detail/2010/warning-for-trade-me-car-advertisers
The Fair Trading Act. Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.

ENDS

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