Jewellery retailer Michael Hill was fined $169,000 following a Commerce Commission investigation into its extended warranty product.
The Commerce Commission investigation centered around the retailer’s failure to comply with the extended warranty disclosure requirements of the Fair Trading Act.
Michael Hill admitted 12 charges that its Professional Care Plan (PCP) failed to comply with the extended warranty disclosure requirements between May 31, 2017 and May 30, 2018.
The retailer 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.
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, and a summary of the consumer’s right to cancel the PCP.
“The law clearly sets out the information that must be provided to consumers when selling an extended warranty,” said Commissioner Anna Rawlings. “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,” she said.
Rawlings said 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.
Barry said 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,” Barry said. “The consumers were effectively ‘guiled’ into paying for the warranty product.”
A Michael Hill spokesperson said they have been fully cooperating with the NZ Commerce Commission about this matter and chose not to contest their technical classification of a PCP as an extended warranty, according to a report from the NZ Herald.
“PCP continues to be a unique and valuable servicing arrangement which entitles our customers to services beyond those under the Consumer Guarantees Act,” the Michael Hill spokesperson said. “We will make the necessary changes to our sales brochure to reflect the extended warranty classification, which include a comparison table within the terms and conditions to clarify and differentiate the protections of the Consumer Guarantees Act and the unique benefits and services of a PCP.”
Michael Hill added it was an isolated incident where a refund was previously provided to the customer within a fortnight of their purchase once the company became aware that the sales professional may not have followed the correct procedure on this specific occasion.
