Companies warned to deliver on 'free' promotions

The Commerce Commission has warned companies running promotions to deliver on their promises after an Auckland car dealer offering customers a "free" flight to the Gold Coast was convicted of breaching the Fair Trading Act.

Auckland District Court last week found Tower Motor Group's "buy a car get a free flight" promotion was misleading.

Anyone who wanted to use the "free" flight had to pay for inflated accommodation on the Gold Coast to qualify.

The extra charge for the accommodation in effect meant customers were paying for the flight.

Tower Motor Group was fined $15,000 for breaching the Fair Trading Act. It agreed to pay $1000 to each of the three customers who bought cars during the promotion.

Customers were not warned of the accommodation requirement when the promotion was explained to them.

One customer told the salesman that she planned to stay with relatives on the Gold Coast, and he did not mention that paying for accommodation was part of the deal.

Commission director of fair trading Deborah Battell said it was also prosecuting the promoter of the flights, which had been offered by over 50 New Zealand businesses.

Most businesses offering the promotion were car yards, but it was also offered by bars, and by furniture and bed retailers, she said.

Promotions did affect the decisions people made when buying goods. "In this case, the three consumers who complained to the commission were left regretting the decision they had made on the basis of the misleading offer," Ms Battell said.

Companies running promotions or "free" offers needed to deliver on their promises, she said.

"Free offers and promotions are designed to give companies a competitive edge.

"Retailers need to understand that they are legally liable for any promotions they offer to customers."

Ms Battell said that while Tower Motor Group had not been aware that the price of the accommodation was inflated, it should have realised that the flights were not truly "free". Tower had paid only $71 for the tickets.

"To protect themselves from prosecution, companies must ensure that any promotions they offer are genuine and that consumers are getting what they are promised.

"Our message to businesses is that if they are approached to take part in a scheme that seems too good to be true, they need to be sceptical and make proper enquiries, otherwise they may lose customer goodwill and face prosecution."

- NZPA