Air NZ ad ruling 'great' for all shoppers

A court ruling that Air New Zealand misled the public over fares has been welcomed as a precedent that could help consumers to determine the true cost of other services and products.

A District Court judge has ruled that the airline misled people by not fairly including extra costs when it advertised fares.

The case was taken by the Commerce Commission, which said the advertising broke the Fair Trading Act by not fairly saying what the cost of air travel was.

Judge Stan Thorburn criticised the use of "microscopic", "minute" and "tiny" asterisks in the advertisements that pointed consumers to fine print on the true nature of extra charges.

Consumers' Institute chief executive David Russell called it "a great decision for the consumer because it means that airlines and all other traders have to be honest in their advertising and not try and disguise the true price of the service or the goods that they're offering".

The decision established an important precedent.

"When you buy a can of beans you don't buy the beans and go up to the checkout counter and have an extra couple of cents banged on for the fuel surcharge for getting the beans from the factory to the supermarket."

The case is being closely watched by rival airlines and the travel industry, since the commission is also preparing a case against Qantas.

In his reserved decision, Judge Thorburn agreed with the commission on 14 of the 20 sample charges, saying fuel costs were an operating expense and "ought not to be separated out from a headline price". A company had to work out the price it needed to charge to provide the service.

"That is the price it should promote. It should be inclusive of, and made up of, operational expenses. Separating out the cost of fuel makes the headline price false."

Air NZ faces a fine of up to $100,000 for most of the charges and a further $200,000 for charges relating to advertisements that ran after July 2003, when the maximum fines were raised. Sentencing is likely in the new year.

Air New Zealand's group general manager of marketing, Norm Thompson, said the ruling related to advertisements that ran between 2001 and 2004.

"Judge Thorburn found that one-third of the advertisements he was asked to rule on were acceptable. Therefore, we have to clearly understand the subtleties of his ruling and ensure future advertising is within the precedent that he has now set."

The airline defended itself by saying customers knew headline prices were not the total amount needing to be paid and further investigation was always needed before flying.

While only 20 sample charges were analysed by the court, the Commerce Commission says Air NZ broke the law in 355 newspaper advertisements.

The decision will have ramifications for the Interislander ferry service, which this month introduced an airline-style fuel surcharge of $3 a passenger and $7 a vehicle.