Watchdog has eye on 'sharp' dealers

By CHRIS DANIELS

consumer reporter

The Commerce Commission will continue its battle against sharp car dealers after yesterday unveiling a scam it says is common practice in the industry.

One dealer has just reached a settlement with the commission after raising the price of a car, then reducing it immediately for a special "clearance sale."

Commission chairman John Belgrave said it was common practice among some dealers to increase prices for "sale" or trade-in promotions.

False and misleading claims made about prices and reductions breach the Fair Trading Act.

"Inflating prices for a promotion is an unacceptable practice," said Mr Belgrave. "If we find it in our surveillance of car dealers, then prosecutions are likely."

Wellington dealers Avery Motors advertised a Suzuki Vitara for "$19,990, reduced to $16,930."

The commission said the same car had recently been available from the dealer for $14,990, so the firm had actually increased the price for its special "clearance sale."

Avery Motors has agreed that the claimed reduction was incorrect and misleading, and said it would ensure that all future advertising was accurate. It will also review its compliance and training programmes before reporting back to the commission.

The commission said it is watching car dealers closely this year and they would not be let off the hook once its surveillance ended.

"They are still a target for the commission, because we are very concerned that there are systemic compliance problems within that industry," said fair trading manager Ross McPherson.

"Why car dealers don't take that much notice of the Fair Trading Act I couldn't really say. All I can say is that they are not taking enough notice of it.

"We've come down hard this year but it's not having the desired effect yet, so it will continue."

The executive director of the Motor Vehicle Dealers Institute, Steve Downes, said the industry was good at policing itself, with dealers reporting others who might be breaching the rules.

False price reductions were wrong and not condoned by the institute.

"It's a silly practice and one that we find to be dishonest."

The institute was working with the commission to educate dealers on the law and was setting up seminars for members across New Zealand this year.

A conviction for breaching the Fair Trading Act can bring a fine of $100,000 for a company or $30,000 for an individual.

As part of the campaign to clean up the industry, the commission said that dealers were hiding the true costs of cars in advertising fine print.

It reached settlements last year with BMW, Mitsubishi, Holden, Nissan and Millennium Motors, of Auckland, for breaching the Fair Trading Act.

BMW, Mitsubishi, Holden and Nissan had offered new cars for payments of $79 to $299 a week, but had not adequately informed buyers that they would have to make a final payment or deposit of between $2750 and $58,750.