Gateway fined for hiding costs in small print

By CHRIS BARTON

PC manufacturer Gateway was fined $21,500 in the Auckland District Court yesterday for concealing additional costs to buyers in small print on its advertisements.

Gateway pleaded guilty to six charges in breach of the Fair Trading Act for failing to adequately disclose that a delivery charge of $45 would be added to the sale price. There was also one charge of inaccurate advertising, representing the components of a Performance 600 computer advertised in a brochure as including a CD-Rom recordable disk when it did not.

Judge McElrea imposed a higher fine than the $15,000 proposed in a joint penalty submission by the Commerce Commission and Gateway because "the offending went on for a considerable period and involved extensive advertising" and because it continued after warnings by the Commerce Commission.

The offending advertisements ran between March 1999 and February 2000 in several newspapers, including the Herald. Most adverts carried the phrase "all prices exclude handling, delivery and insurance," but it was in small print and outside the main body of the advertisement. On one occasion, no mention of extra charges was made.

Gateway had been warned once in October 1998 and again in March 1999 - when it was in the process of acquiring local manufacturer PC Direct - about using small print in its advertising. It is the second company in a week to be convicted of such an offence.

Last week, the Dunedin District Court fined Air New Zealand subsidiary South Pacific Air Charters, which trades as Freedom Air International, $4000 for its use of small print.

The Commerce Commission said the two convictions should be seen as a warning to all advertisers that small print cannot save advertising from being misleading.

Commerce Commission chairman John Belgrave said misleading use of small print was a common problem that the commission would continue to focus attention on.

"Consumers must be able to rely on the overall impression created by advertising," Mr Belgrave said. "All important conditions must be clearly and accurately disclosed. If the information in small print is important, then why is it in small print?

"Misleading claims like those made by Gateway can harm consumers in two ways," Mr Belgrave said. "First, they are likely to be induced to purchase by misleading claims about the total cost. Secondly, they are unlikely to be able to accurately compare competitors' prices."