An advertisement for a free warranty on a printer has landed retailer Harvey Norman in hot water with the Commerce Commission.
Commission fair trading manager Rachel Leamy says Harvey Norman risked breaching the Fair Trading Act by increasing the price of the printers for the promotion. An investigation showed that before the promotion Harvey Norman had the printer for between $799 and $849. During the promotion the printer was offered for $899 including a “free extended warranty to the year 2003”.
Harvey Norman has given the commission a signed undertaking that it will not inflate the price of goods or services to cover the cost of any associated free gift, item, service or extended warranty; will implement a compliance programme to ensure it complies with the Fair Trading Act in the future; and will report back to the commission in three months.
The meaning of “free” in promotions was clarified in 1995 by the Court of Appeal when it ruled that prices must not be increased to cover the cost of something described as a free offer.
Leamy says in the past three months the commission has received 69 enquiries about problems with free promotions.
She says the IT industry has been a target for surveillance over the past two years.
“Basically, it’s an industry where there is a lot of concern about people being misled. It’s a fairly new industry in terms of home computer buyers. We are monitoring all aspects.”
The commission is also trying to ascertain the scope of the year 2000 problem with regard to vendors selling products as Y2K-compliant when they’re not, or whether vendors should be allowed to make customers pay for Y2K upgrades.