Bike shops in 'closing down' sale warning

The Commerce Commission says customers often changed their shopping habits to take advantage of the special and limited opportunities such as closing down sales. Photo / Thinkstock

Two bike shops have been warned by the Commerce Commission for holding closing down sales - but not actually closing down.

Bike Vegas in Rotorua and Penny Farthing Cycles in Auckland received warning notices from the Commerce Commission advising them to stop promoting closing down sales or risk prosecution and a hefty fine.

Bike Vegas store's manager said there was no intention to mislead customers.

The Commerce Commission general manager competition branch Kate Morrison said they started investigating the stores in January after finding out Bike Vegas had been holding a closing down sale since October 2011.

Morrison said Bikes International Limited took over Bike Vegas in July 2011 and started advertising a closing down sale that was still running until March.

"The commission's investigation found that Bikes International planned to re-brand Bike Vegas as Bike Barn, but never intended to close down the store. The company even brought in additional stock to sell during the sale," she said.

Bikes International also took over Penny Farthing Cycles, on Symonds St, in June, and advertised a closing down sale in October which continued into the new year, the commission said.

If prosecuted by the courts under the Fair Trading Act an individual could face a maximum fine of $60,000 for each offence and a company a maximum fine of $200,000 for each offence.

"The fact that Bikes International had no definite closing down dates when it started the sales, kept the sales running for several months and brought in extra stock was at odds with the concept of a closing down sale. In our view, a closing down sale must offer reduced prices for a limited time only and must have a definite closing down date.

Customers often change their shopping habits to take advantage of the special and limited opportunity a sale like this represents. In cases like these, not only can customers be misled, but competitors may also be disadvantaged," Morrison said.

In this case the company got away with a warning, but they could be prosecuted if they did it again in future.

Bike Vegas store manager Riki Gurden said there was no intention to mislead customers. Delays forced them to put a hold on the re-branding exercise.