New Zealand’s largest gym company, City Fitness, has been ordered to pay a $1.12 million fine by the Commerce Commission following a breach of the Fair Trading Act.

ComCom filed charges against City Fitness last September, which, at the time, was advertising cheap memberships at $6.99 per week.

But these memberships included a 3 per cent transaction fee. ComCom said it was charged to more than 125,000 members, creating an additional $1.6 million in revenue.

“City Fitness continued to advertise this price even after introducing a 3 per cent ‘transaction fee’. This fee was compulsory for all new members, meaning the gym was attracting customers by publicising a price that did not actually exist,” ComCom deputy chair Anne Callinan said.

“This created a misleading impression that the fee was a surcharge related to a customer’s choice of payment. Our investigation found its actual purpose was to lift overall business revenue.”

During sentencing, Judge David J Clark said that City Fitness’s decisions “had the effect of misleading potential members” over what they could pay when joining.

“City Fitness needed an increase to cover the increasing operating costs, but rather than fully disclosing this to its members, it chose to achieve this through a mechanism which was patently false in terms of its true purposes,” Clark added. 

“There was an intent by CityFitness to mislead or deceive potential members by not disclosing the true nature of the transaction fee and disguising this fact.”