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Tuesday, March 16

Car dealership company pleads guilty to breaching Fair Trading Act


An Auckland based car dealership has pleaded guilty to five charges of breaching the Fair Trading Act for a misleading promotion about a 0% interest finance offer. They have been fined $18,000 in the North Shore District Court today.

In late 2008 and early 2009, Tristram European Limited ran a promotional campaign in newspapers, on Trade Me and on its website, offering 0% interest finance on both its new and used stock. 

However two customers enquiring about the offer at the car yard were told that the interest-free finance offer was only available on the full retail price of the vehicles. They were also told that a lesser vehicle price could be negotiated for cash or for a sale on interest-bearing terms.

“It has been well established through the courts that to avoid the risk of breaching the Fair Trading Act ‘interest free’ prices should be the same as the cash price. When a company advertises an interest free deal but has a lower price for cash, there is an inference that the difference between the two prices is the cost of finance,” said Greg Allan, Commerce Commission Fair Trading Manager, Wellington .

“While businesses are able to set their own prices for goods and services, when they advertise that something is ‘interest free’ it must be exactly that. They cannot build the cost of any interest in to the price charged to consumers,” said Mr Allan.

“Consumers are often attracted by interest free offers. If the offers are not truly interest free, then not only are consumers misled but other businesses who are accurately describing their prices may be disadvantaged. This case is a reminder to businesses that information about their prices must be accurate and not have the potential to mislead consumers,” said Mr Allan.

In addition, Tristram European Limited did not disclose in its advertising that there was a $350 establishment fee payable for a vehicle purchased on ‘interest free’ terms. This meant that consumers were likely to be misled about the cost of the finance.

In sentencing, Justice McNaughton noted that the breaches were deliberate and calculated but there was no demonstrated loss to consumers.