New Zealand Law Society - Jeweller fined $169,000 in extended warranty case

Jeweller fined $169,000 in extended warranty case

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Jewellery retailer Michael Hill has been fined $169,000 in the Wellington District Court following a Commerce Commission investigation into its extended warranty product.

The Commission says Michael Hill Limited admitted 12 charges that its Professional Care Plan (PCP) failed to comply with the extended warranty disclosure requirements of the Fair Trading Act between May 2017 and May 2018.

The PCP includes various services to prolong the life and maintain the appearance of the jewellery item. The PCP documentation supplied to customers failed to include all of the required information on the front page, including:

  • Comparing the protections consumers automatically have under the Consumer Guarantees Act (CGA) with the protections offered by the PCP,
  • An adequate summary of consumer rights and remedies under the CGA,
  • A summary of the consumer’s right to cancel the PCP.

The Commission says Michael Hill Limited also admitted one charge that it misled consumers by adding the cost of the PCP onto the price of a bracelet, without the knowledge of a Whangarei couple who bought it in June 2016.  The couple were later refunded the cost of the PCP after complaining to Michael Hill.

Commissioner Anna Rawlings says: the law clearly sets out the information that must be provided to consumers when selling an extended warranty.

“That information helps consumers to decide whether an extended warranty offers them value over and above the rights they already have under the CGA. They can then decide whether it is worth the extra cost. The cost of the extended warranty should be made clear. Where the required information is not provided, consumers who purchase these products may be able to cancel their agreements and obtain a refund of the cost of the warranty.”

In sentencing, Judge DRW Barry said the conduct was a significant set of failings, not a mere minor oversight. It “impugns the objectives of the FTA as consumers had no immediately discernible comparison between their rights under the CGA and those covered by the PCP. The financial harm to the couple [the consumers] was caused by the conflation of the warranty price with the price of the bracelet. The consumers were effectively ‘guiled’ into paying for the warranty product.”