Chrisco Hampers Limited, the Christmas hamper seller, was fined $175,000 in the Manukau District Court yesterday, for breaches of the Fair Trading Act 1986. Chrisco had earlier pleaded guilty to misleading customers about their rights to cancel hamper and toy orders. Consumers’ rights to cancel these types of purchases are governed by the Layby Sales Act 1971.
The Commerce Commission investigated the cancellation policy and then brought 10 charges under the Fair Trading Act. The breaches related to customers being mislead about what they could be charged if they cancelled at a particular time, how they could cancel, and in some instances, at what point in time they could cancel.
“Chrisco’s cancellation policy meant that the company recovered more than it should have under the Layby Sales Act, so customers were overcharged. As the fee was worked out as a percentage of payments already made, some customers ended up being charged hundreds of dollars. In a few cases the fee was as much as $800,” said Graham Gill, Commerce Commission Competition Manager.
It appears that one of the factors that influenced the Commission was that Chrisco did not have a Fair Trading Act compliance programme in place. This was despite the Commission previously raising concerns with the company about various practices including its cancellation policies. It’s a useful reminder about how important it can be to have compliance and legal checks for commercial policies and marketing material.
“During the investigation Chrisco advised us that it did not have a formal compliance programme in relation to the Fair Trading Act … Customers expect that large companies will have proper and lawful practices in place,” said Mr Gill.
The Commerce Commission has some useful resources to help companies develop and check their Fair Trading Act compliance programme, available for free: Commerce Commission FTA Compliance.