The Commerce Commissioner is calling for “significant” penalties, “substantially” higher than in a previous case, for two Pak’nSave supermarkets that breached fair trading rules.
A prosecutor warns that failing to send a firm message could incentivise grocery retailers taking risks.
The supermarkets – which are now waiting to learn their fate – are also trying to suppress some business information relating to the case, citing commercial sensitivities.
Both supermarkets advertised prices that did not match what they were charging at the point-of-sale, and promoted specials or discounts where no special actually existed.
In March last year, the Commerce Commission filed criminal charges against Pak’nSave Silverdale in Auckland and Pak’nSave Mill St in Hamilton over fair trading offences.
The Mill St trader pleaded guilty to eight charges and the Silverdale supermarket admitted 10 charges.
Each charge is subject to a maximum penalty of $600,000.
The sentencing was heard in the Auckland District Court last week before Judge June Jelas, who reserved her decision.
Commerce Commission prosecutor Nick Flanagan argued the supermarkets could be incentivised to take risks if the penalties imposed were not significant.
He said being a high-volume business that made frequent price changes was not an excuse for the breaches.
Flanagan pointed out that another Pak’nSave had earlier been before the courts regarding similar breaches.
He said this indicated the level of penalty in the previous case, against Pak’nSave Māngere, was not enough to prompt the supermarkets to make necessary changes to ensure prices were accurate.
In the 2020 Māngere case, the supermarket was fined $78,000 for discrepancies between the promotional price displayed or advertised – and the price charged at the till.
Flanagan argued the fine imposed on the two latest stores needed to “substantially increase” from this figure.
He also told the court prices had been being advertised as specials when they were “nothing of the kind”.
For instance, one product was advertised as extra low, when it was actually priced at that level 90.7% of the year.
Staff were manually updating prices at Silverdale, he said, without a systematic approach.
An electronic system came into effect at the store in October 2024.
However, Flanagan said errors continued because there was so much confidence in the new system that prices were not being checked as often.
At Mill St, which did have an electronic system, the store did not have processes in place to properly record price complaints before June 2024, Flanagan said.
This failure would have led to more breaches, he submitted.
Flanagan argued the excess revenue from breaches recorded at Mill St “materially understates” the true gain the store would have received from its misleading prices.
He sought a penalty starting point of $160,000 but accepted the operators should get a 25% discount for pleading guilty at the earliest opportunity.
The commission, however, could not accept both entities receiving the same discount for co-operation. Flanagan argued the Mill St store should receive a lesser discount of 5%, compared to 10% for the Silverdale store.
In response, defence lawyer Iain Thain argued both stores should get the full 10% discount for co-operation.
He said the court was not in a position to decide on the commission’s claim that Mill St had not provided the “full facts” during an interview.
Thain also said it was “not right” to say the two stores had learned nothing from the Māngere case.
The Māngere store used paper labels in its product pricing, while Mill St used electronic shelf labels, in part due to increased errors associated with paper pricing.
Pak’nSave Silverdale had also moved to digital labels before the prosecution commenced, towards the end of the offending period.
Thain pointed out that on some occasions, consumers had benefited from breaches.
For example, a wooden display board had advertised Vogels for $5, but customers were charged less at checkout, in most cases $4.
At Mill St, a staff member with a scanning gun would check prices every morning in the fresh food section to ensure they were correct, Thain said.
As a result, only two of the 18 breaches were related to the fresh food department.
Unless staff were “constantly” scanning, errors could still occur with electronic prices, Thain said, for example, if someone bumped an electronic label or it ran out of battery.
Thain said each store had made further improvements to their systems once the proceedings began, which he argued showed remorse.
Following applications from the media, the supermarkets asked the judge to suppress some aspects of the summary of facts, citing commercial sensitivities and disputed facts relating to Mill St.
Judge Jelas reserved her decision on the summary, and the sentencing, until at least mid-June.
Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.