New Zealand Law Society - Car retailer charged over ad claims and “warranty waivers”

Car retailer charged over ad claims and “warranty waivers”

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Vehicle retailer 2 Cheap Cars faces 10 charges under the Fair Trading Act 1986 over its “must liquidate" and “84% off” advertising claims and its use of “warranty waiver” documents, following a Commerce Commission investigation.

The investigation was opened in November 2017 after the Commission received complaints from consumers.

The Commission says, in advertising for two sales in 2017, 2 Cheap Cars made statements including that “2 Cheap Cars is in hot water, it must liquidate immediately”, and “A massive price drop this weekend!”.

The Commission alleges this advertising was misleading because it suggested that many vehicles would be significantly discounted, and there would be no further opportunity to purchase from the firm. Most of the 710 vehicles then for sale nationwide were not discounted at all or had discounts of only $5, and 2 Cheap Cars was not in, nor going into, liquidation.

Earlier in 2017, 2 Cheap Cars’ newspaper advertising included the phrase “84% off”. The Commission alleges this was misleading because the “84% off” claim, together with the phrase “Massive Stock Liquidation: This Weekend Only” created the impression that the discount was off the price of the cars. In fact, the discount was off the price of a $300 GrabOne voucher that could be used towards purchasing a vehicle. 

Warranty waivers 

Between 1 January 2014 and 31 December 2017, the Commissions says 2 Cheap Cars frequently asked car buyers to sign a “warranty waiver” document if they chose not to purchase an extended warranty. The “waiver” included terms such as:

  • “the vehicle you are purchasing does not include a warranty of any kind.”
  • “[If] you choose not to purchase the indicated warranty at this time, you must sign this waiver.”
  • “I do understand that 2 Cheap Cars will comply with the Consumer Guarantees Act. I also understand that I am, and would prefer to be, solely responsible for any repair bills.”
  • “if any repairs are carried out it will be done by 2 Cheap Cars [L]imited at a time of their convenience and that there are no courtesy cars provided.”
  • “Consumable items such as but not limited to tires [sic] and batteries … are not covered by the [Consumer Guarantees Act].”

The Commission alleges the waiver documents misrepresented consumers’ rights under the Consumer Guarantees Act 1993 (CGA) because:

  • Under the CGA consumers have rights of remedy against suppliers whether or not the goods are covered by any other warranty;
  • A consumer does not lose the CGA protections by declining to purchase an extended warranty;
  • Remedies under the CGA must be done within a “reasonable time”, not at the convenience of the supplier, and consumers can recover from the supplier costs which are reasonably foreseeable as a result of the failure. They may include the cost of hiring a rental car while a repair is being undertaken;
  • The CGA applies to the goods purchased which in this case includes the tyres and batteries.

The Commerce Commission estimates that consumers signed in excess of 20,000 warranty waivers during the charge period and 2 Cheap Cars stopped using them in December 2017, after being notified of the Commission’s investigation.

Car dealer warned over sales claims

The Commerce Commission has issued a warning to Mosgiel-based motor vehicle trader Taieri Motor Court (TMC), for likely breaching the Fair Trading Act 1986 (FTA) during its sale of two motor vehicles.

TMC trades from branches in Mosgiel and Mt Roskill, Auckland, and via its website and Facebook page.

In the Commission’s view, TMC’s conduct is likely to have breached the FTA by:

  • making misleading representations about the distance a vehicle offered for sale had travelled, and about selling vehicles on a private basis
  • failing to comply with the Consumer Information Standards (Used Motor Vehicles) Regulations 2008.

The Commission considered a complaint alleging that TMC advertised on its Facebook page a 2001 Subaru Impreza with an odometer reading of 160,000km. The Subaru’s odometer reading was actually 166,000km. When responding to the Commission’s enquiries, TMC advised that the Subaru was sold privately and without TMC displaying or providing to the purchaser a Consumer Information Notice (CIN).

“We have warned TMC that, in our view, its odometer representation and its failure to display a CIN likely breached the FTA. Traders must display a CIN in the vehicle and in the online advertisement if selling online, and they must not misrepresent the history of a vehicle, including information such as the distance it has travelled,” said Commissioner Anna Rawlings.

The Commission subsequently identified another vehicle on TMC’s Facebook page, a 2013 Mercedes AMG, being advertised as a private sale. The Commission established that at the time of advertisement, both the Mercedes and the Subaru were registered to TMC.

“Different rights and obligations apply when consumers buy from a person in trade as opposed to a private seller, so telling consumers that they are buying privately has the potential to mislead them about their rights if something goes wrong,” said Ms Rawlings.

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