PB Technologies has been fined $77,000 in the Auckland District Court after pleading guilty to 14 charges brought by the Commerce Commission over its extended warranties.
Owned by rich listers Pat Huo and Lan Yu, PB Tech (as it's popularly known) bills itself as New Zealand's largest computing and IT reseller.
Consumer magazine has labelled extended warranties as worthless in most cases, given customers are being sold rights they already enjoy under the Consumer Guarantees Act (a notable exception is goods sold for business use, which are not covered by the CGA).
Retailers are allowed to sell an extended warranty, but only if they provide a customer with a summary of their rights under the CGA first, plus a summary of how the chain's extended warranty compares to the CGA. They are also obliged under the Fair Trading Act to inform a customer - verbally and in writing - that they can cancel an extended warranty within five working days if they change their mind (read Consumer's quick guide to the Act here).
The ComCom alleged that between May 11 and November 30 2017, PB Tech sold 4150 of its PB Care extended warranties without giving customers the information they needed to make an informed choice.
It also sold AppleCare warranties without following Fair Trading Act guidelines, the ComCom said.
The regulator says Judge Thomas agreed with its stance that there was a need for a deterrent response.
However, the $77,000 fine falls well short of the maximum $420,000 in penalties that could have been imposed for the 14 charges (the maximum penalty for each charge under the Fair Trading Act is $30,000).
PB Care warranties were sold for between 10-15 per cent of the value of the good, depending on the length of the warranty. AppleCare warranty prices also varied depending on the product. The ComCom gives the example that a two-year warranty for a $460 Apple iPad was $129.56 - implying PB Tech's revenue from PB Care would have been in the hundreds of thousands during the period of offending.
A ComCom spokeswoman says Judge Thomas set a starting-point fine of $110,000. He then applied a discount of around 7% to take account of PB Tech's quick response to the Commissions' investigation, co-operation, and lack of previous convictions. And then a further 25% discount for the early guilty plea for an end fine of $77,000.
Consumer is lobbying for higher fines under the Fair Trading Act for offences related to extended warranties. Our current penalties look light next to Australia, where Apple was recently fined A$9 million for misleading customers over extended warranties.
Head of research Jessica Wilson says Consumer also wants to see the ComCom given the power to impose substantial fines without recourse to the courts.
In July, when PB Tech first announced guilty pleas, general manager Darren Smith said the retailer had already changed its ways.
"The information we had previously provided to consumers about the benefits of our popular PB Care Programme was not as detailed as it should have been but we have since fixed the issues identified and are now 100 per cent compliant with all New Zealand consumer laws," Smith said.
The retailer continues to sell its extended warranties (whose cost varies by product), pushing advantages over the CGA such as a provision to supply a loan unit while a product is repaired.
July also saw the ComCom warn PB Technology over bait advertising after a "Cyber Monday" promotion that saw a promotional email for Apple's Watch go to 100,000 customers when the retail chain had only 14 units in stock.
Businesses must remember they should have reasonable grounds for believing they can supply the goods in reasonable quantities when they advertise them for sale," commissioner Anna Rawlings said.
Again, PB Tech's Smith did not argue the point. The GM said his company has taken the ComCom's warning onboard and changed its approach.
July - something of a busy month on the regulatory front - also saw PB Tech admit to breaches of the Unsolicited Electronic Messaging Act, and sign an undertaking with Internal Affairs. Smith says it is now fully compliant with anti-spam legislation.
The ComCom also has an extended warranty case against Noel Leeming (part of The Warehouse Group). Noel Leeming plead guilty in August. A sentencing hearing is scheduled for December 14.