The District Court has imposed fines totalling $1.104 million on Brand Developers Limited (BDL), trading as TV Shop, following convictions on 13 charges under the Fair Trading Act 1986 (FTA).[1] The decision is a significant recent penalty judgment and provides useful guidance on how the courts assess culpability for misleading conduct affecting consumers.

Background

In a reserved decision[2] following a 13-day Judge Alone Trial, Judge Sellars KC found BDL guilty of 13 charges arising from three categories of conduct between 2017 and 2023:

undisclosed staff reviews and suppression of negative customer reviews online;
misleading representations about consumers' rights under the Consumer Guarantees Act 1993 (CGA); and
misleading "free", "bonus" and "special offer" advertising relating to the Air Roaster Pro product.

Judge Sellars KC observed that conduct of this nature had not previously been considered by a New Zealand court in this context.

Online reviews

The Court found that BDL directed staff to post positive product reviews without disclosing their connection to the company and systematically restricted the publication of low-rated customer reviews.

The offending was characterised as deliberate, systematic and sustained. The Court placed particular weight on the fact that the conduct was directed by senior management and was designed to create a misleading impression of consumer sentiment. Consumers were deprived of the opportunity to make fully informed purchasing decisions, while competitors were disadvantaged.

A starting point of $550,000 was adopted for this category of offending.

Consumer Guarantees Act representations

The Court also found that BDL repeatedly represented that consumers' rights were governed by its own refund and warranty policies, rather than by the CGA.

Judge Sellars KC was critical of BDL's compliance culture, finding that the conduct arose from company policies and procedures and continued after the Commerce Commission's investigation had commenced. Although the Court did not find a deliberate intention to deny consumers their statutory rights, it concluded that misleading consumers was an inevitable consequence of BDL's practices and assessed the conduct as being at the "highest level of carelessness".

A starting point of $600,000 was adopted for this category of offending.

Air Roaster Pro advertising

The final category concerned advertising that promoted an accessory pack as "free" or a "bonus", despite the product always being sold with the accessory pack. One advertising campaign also portrayed the package as a limited-time special offer when it was not.

While Judge Sellars KC considered the conduct to involve a high degree of carelessness, the Court viewed it as less serious than other misleading pricing cases because it related to a single product rather than a broader marketing strategy.

A starting point of $180,000 was adopted for this category of offending.

Final sentence

The Court combined the three starting points to reach an overall starting point of $1.33 million. After allowing discounts for totality, cooperation and remorse, the Court imposed a final fine of $1.104 million.

Comment

The decision reinforces that misleading online reviews, failures to properly recognise consumers' statutory rights, and misleading promotional pricing can attract substantial penalties under the FTA, particularly where the conduct is systemic and supported by senior management.

The judgment also highlights the importance of robust compliance systems and ensuring that consumer-facing staff accurately understand and communicate statutory consumer rights.