Retailer Michael Hill New Zealand has been fined $169,000 in the Wellington District Court today following a Commerce Commission investigation.
The investigation was centred around the jeweller failing to comply with the extended warranty disclosure requirements of the Fair Trading Act.
Michael Hill admitted 12 charges that it's Professional Care Plan (PCP) failed to comply with the requirements between May 31, 2017 and May 30, 2018.
The PCP includes various services to prolong the life and maintain the appearance of the jewellery item.
Documentation of the PCP provided to customers failed to include all of the required information on the front page, including:
• Comparing the protections consumers automatically have under the Consumer Guarantees Act (CGA) with the protections offered by the PCP
• An adequate summary of consumer rights and remedies under the CGA
• A summary of the consumer's right to cancel the PCP
The company also admitted to one charge of misleading consumers by adding the cost of the PCP onto the price of a bracelet, without the knowledge of a Whangarei couple who bought it in June 2016.
Commissioner Anna Rawlings said New Zealand law clearly sets out the information which must be provided to consumers when selling an extended warranty.
"That information helps consumers to decide whether an extended warranty offers them value over and above the rights they already have under the CGA," she said.
"They can then decide whether it is worth the extra cost. The cost of the extended warranty should be made clear.
"Where the required information is not provided, consumers who purchase these products may be able to cancel their agreements and obtain a refund of the cost of the warranty."
Judge DRW Barry said in sentencing the conduct was a significant set of failing and not a minor oversight by Michael Hill.
"[It] impugns the objectives of the FTA as consumers had no immediately discernible comparison between their rights under the CGA and those covered by the PCP," Barry said.
"The financial harm to the couple [the consumers] was caused by the conflation of the warranty price with the price of the bracelet.
"The consumers were effectively 'guiled' into paying for the warranty product."
A spokesperson for Michael Hill said: "Michael Hill has been fully cooperating with the NZCC in relation to this matter and today chose not to contest their technical classification of a Professional Care Plan ("PCP") as an extended warranty.
"PCP continues to be a unique and valuable servicing arrangement which entitles our customers to services beyond those under the Consumer Guarantees Act. We will make the necessary changes to our sales brochure to reflect the extended warranty classification, which include a comparison table within the terms and conditions to clarify and differentiate the protections of the Consumer Guarantees Act and the unique benefits and services of a PCP.
"Michael Hill chose not to contest the single charge in relation to the sale of a PCP to an individual customer in 2016. This was an isolated incident where a refund was previously provided to the customer within a fortnight of their purchase, once the Company became aware that the sales professional may not have followed the correct procedure on this specific occasion."