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The Spinoff
5 days ago
- Business
- The Spinoff
When big companies face criminal charges, what does it actually mean?
Noel Leeming is the latest big retailer to be criminally prosecuted by the Commerce Commission. But what do the charges actually mean, and will they make a difference to uncompetitive or unfair behaviour? Last week, the Commerce Commission announced it was filing criminal charges against Noel Leeming in the Auckland District Court. The government's consumer watchdog claimed the electronics chain, which is owned by The Warehouse, had breached the Fair Trading Act, particularly in its 'price match' guarantee; often, according to the commission, products from other companies will not be matched, despite Noel Leeming advertising that they will. 'It's crucial that businesses promoting any price match offer factor in the overall impression of the claims they make, and that all information is clear to customers,' said Anne Calliman, the deputy chair of the Commerce Commission, in a press release. It's not the first time the commission has filed criminal charges against retailers: Woolworths NZ, and some specific Pak'n'Save supermarkets (which are operated under a franchise model) were served with criminal charges last December for alleged breaches of the Fair Trading Act, while civil proceedings were filed against Foodstuffs North Island and Gilmours last week for alleged cartel conduct in breach of the Commerce Act. But what punishments can really be handed out? And does being served with criminal charges make a difference to how companies operate? What is the Commerce Commission? Great, starting with an easy one. The commission, also known as the CommComm (cute!), is New Zealand's competition, consumer and regulatory agency. An independent Crown entity, it's responsible for enforcing a few different laws. Under the Commerce Act, the commission can conduct market studies into competition, investigate mergers between businesses which may reduce competition and harm consumers, and recommend that particular goods or services are regulated if there is little competition. If people have been engaging in cartel conduct (ie price fixing or bid rigging), the commission can bring civil charges under the Commerce Act, with penalties including fines of up to $500,000 for an individual and $10 million (or more) for a company. As of 2021, it can also bring criminal charges under this law which could lead to imprisonment of up to seven years for individuals. Under the Fair Trading Act (FTA), the commission can investigate and prosecute companies and individuals for misleading pricing, including contract terms and pyramid schemes. It can file criminal charges through the District Court, with fines of up to $200,000 per offence for individuals and $600,000 per offence for companies. The commission also enforces some parts of the Telecommunications Act (how people are charged for internet and phone services), the Dairy Industry Restructuring Act (how Fonterra charges for raw milk) and and the Credit Contracts and Consumer Finance Act (money lending). People can report companies for suspected breaches of these acts, and the commission can respond by investigating and potentially filing civil or criminal charges. So the Commerce Commission can't investigate or prosecute 'high prices' – it has to have a specific example of someone breaking the law? Yeah, exactly. It might feel wrong that butter costs $11 – but a breach of the Fair Trading Act would be a misleading special, like butter being advertised as on special for $11 if that was actually the standard non-discounted price, or a shopper being charged $11 when the price tag said $10. Examples of this gathered by independent organisation Consumer and submitted to the ComCom led to Pak'nSave and Woolworths receiving criminal charges. What's the difference between civil and criminal charges? Whether civil or criminal charges are brought will depend on the particular legislation and all the circumstances of the conduct. Where there is a choice between the two, the commission will consider a range of factors including the standard of proof required (civil cases must be proved on the 'balance of probabilities' standard, but criminal cases require proof 'beyond reasonable doubt'), the seriousness of the conduct and its consequences and whether the conduct was deliberate or especially blameworthy. Are there any recent examples of companies actually having to pay big fines? Several. Last year, Kiwibank was found to have overcharged 35,000 customers by more than $6.8m, in breach of the Fair Trading Act. Kiwibank found the issues in its system and turned itself into the commission, which brought 21 criminal charges and the bank was fined $1.5m, as well as repaying the customers $9.2m to remediate. In a civil case last year, meanwhile, Foodstuffs North Island was fined $3.25m under the Commerce Act for using land covenants to block its rivals, and in 2023, One NZ copped a $3.6m fine under the Fair Trading Act for misleading customers about fibre broadband. Has the Commerce Commission ever actually sent someone to prison? Not yet, but in December last year, the High Court handed down its first criminal sentence for charges brought by the Commerce Commission under the Commerce Act, to Manesh Kumar, who rigged bids for NZTA projects. He received a sentence o f six months of community detention and 200 hours of community service. Despite the term 'criminal charges', this doesn't usually lead to lawyers yelling at each other across a courtroom, holding up different pictures of price specials available at supermarkets. Many Commerce Commission cases are settled, with the company at fault agreeing to pay a fine and not engage in the bad behaviour again. I've lost count of the articles I've read about how unfair and expensive the grocery sector is. Can the Commerce Commission make much of a difference to the fact that getting a few things for dinner always ends up costing $80? After a market study in 2022 showed that New Zealand needed more competition in the grocery sector to get better prices, the Grocery Industry Competition Act was passed by the government. Since 2023, the Commerce Commission has had a specific grocery commissioner. Yet the high prices, and the depressing headlines, continue. The commission has said that the grocery sector is one of its priorities for 2024/25. It hasn't just focused on supermarkets, but also alternatives, like filing criminal proceedings under the FTA against meal subscription company Hello Fresh for not telling customers that accepting a voucher meant they were resubscribing to the service. It's said the rules need to change so that smaller companies that sell groceries have more alternatives. But because there is so little competition in the sector, all these court cases and call-outs have made little difference. The Commerce Commission can only regulate the commercial sector as it is, not change the system as a whole. Finance minister Nicola Willis has said that breaking up the duopoly of Woolworths and Foodstuffs might be an option. 'Significant action may be required to foster genuine competition,' she said in March. For now, however, criminal charges or otherwise, the status quo remains.
NZ Herald
22-07-2025
- Business
- NZ Herald
Consumer NZ receives 50 complaints about Noel Leeming amid charges
'Our advice to shoppers is that a price promise should be as advertised – without fishhooks and unreasonable conditions,' Duffy said. 'One of our investigations in November 2021 highlighted that the most frequent claim we encountered at Noel Leeming was the 'Price Promise'. 'It was used on every item we tracked, meaning the retailer should match the price of the product if a customer found it cheaper elsewhere. However, some appliances were exclusive to Noel Leeming, so you couldn't find them at other retailers.' A price promise or price match is where retailers promise to match the price of a competitor for the same item as long as certain conditions are met. Consumer NZ chief executive Jon Duffy said the group had received a high number of complaints from consumers about the "Price Promise" practice by Noel Leeming. Photo / Supplied Duffy said Noel Leeming had received several warnings and compliance advice letters from the commission about potentially misleading consumers over the years. Duffy said penalties for Fair Trading Act breaches were not acting as a sufficient deterrent and he believed penalties needed to be increased. Noel Leeming was asked about the complaints received by Consumer NZ but declined to comment. Noel Leeming chief operating officer Jason Bell also wouldn't say how many complaints the business deals with, but said: 'We handle over three million transactions a year, if we don't get something right, we work hard to ensure fair resolutions for our customers.' Asked why the business used the 'price promise' promotional model, Bell said its competitors, including Harvey Norman and JB Hi-Fi, had price match offers just like its own. More questions than answers First Retail Group managing director Chris Wilkinson said the Commerce Commission charges raised more questions than answers. 'ComCom's obviously been working at it for a while. This sector is probably one of the most challenging in terms of pricing to manage. 'Obviously, there are a number of sectors that do these price promises, but it's probably a more limited number of sectors that do it these days because it is such a challenge,' Wilkinson said. 'This is really now limited more towards the home improvement category, so between Mitre 10 and Bunnings. Of course, there's only really two players in that market.' He said the challenge for Noel Leeming in particular comes with appliances, a product category where there is price pressure from several competitors. Wilkinson suggested the promotion may have been a remnant of the strategy from previous leadership. Chris Wilkinson, managing director of First Retail Group, questioned why the Commerce Commission hadn't acted on the issue sooner. Photo / Mark Mitchell Off to court The commission alleges multiple breaches of the Fair Trading Act by Noel Leeming, which is owned by The Warehouse Group, for its 'Price Promise' promotion. 'For over a decade Noel Leeming has prominently promoted their 'Price Promise', which is their commitment to match any competitor's price. We believe their price promise claim was misleading and in breach of the Fair Trading Act,' Commerce Commission deputy chair Anne Callinan said. 'Price match advertising gives the impression that customers will be able to show up and get a match for competitors' prices … we believe Noel Leeming's price promise had many limitations and conditions which weren't made obvious to customers and made any price matches difficult to obtain.' However, Noel Leeming's Bell said they were baffled by the Commerce Commission's decision to press charges. 'We firmly maintain that we have committed no offence and will vigorously defend this. 'We're perplexed by the commission's claim that price matches were difficult to obtain, when over 250,000 Kiwis saved money with our Price Promise between 2019-2021. 'Our terms and conditions are fair and presented just like other retailers, and when we can't price match, we often don't get the sale. Price matching is widely used by the industry, and it helps drive competition, and without it, Kiwis will end up paying more.' Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
1News
21-07-2025
- Business
- 1News
Noel Leeming charged over alleged Fair Trading Act breaches
Technology and appliance retailer Noel Leeming says it is "baffled" and "perplexed" by the Commerce Commission filing charges alleging it misled consumers on its promise to match prices. The Commerce Commission announced it had filed criminal charges in the Auckland District Court against the wholly-owned subsidiary of The Warehouse Group Limited, alleging it had breached the Fair Trading Act. Deputy chairperson Anne Callinan said its "price promise had many limitations and conditions which weren't made obvious to customers". "For over a decade Noel Leeming has prominently promoted their 'Price Promise,' which is their commitment to match any competitors' price. We believe their price promise claim was misleading and in breach of the Fair Trading Act," she said. "Price match advertising gives the impression that customers will be able to show up and get a match for competitor's prices. It's crucial that businesses promoting any price match offer factor in the overall impression of the claims they make, and that all information is clear to customers." The Commission has also filed charges against Noel Leeming regarding promotions where the advertised product or price was different to what could be purchased, and allege the company gave incorrect or misleading information about consumers' rights under the Consumer Guarantees Act when customers complained about faulty products. Callinan said Noel Leeming had previously been "one of our most complained about traders, and we were concerned about the range of issues consumers raised". Noel Leeming's chief operating officer Jason Bell said the company was "baffled" by the decision to press charges. "We firmly maintain that we have committed no offence and will vigorously defend this," he said in a statement. Bell said "our terms and conditions are fair and presented just like other retailers, and when we can't price match, we often don't get the sale". "We're perplexed by the Commission's claim that price matches were difficult to obtain, when over 250,000 Kiwis saved money with our Price Promise between 2019-2021. "Price matching is widely used by the industry, and it helps drive competition, and without it, Kiwis will end up paying more. He said if the business doesn't get something right, it would work hard to ensure fair resolutions for our customers. The morning's headlines in 90 seconds, Mama Hooch rapists appeal, Ukraine's new message to Russia, and Jason Momoa's plans here. (Source: Breakfast) "Some of the additional matters raised by the Commission occurred during the Covid-19-pandemic, when all businesses experienced unprecedented pressure, and our team went to extraordinary lengths to help Kiwis access the products they needed, handling over ten million transactions. "It is concerning that significant public resources and time have been spent on this matter for over three years, while overlooking more pressing potential harm to consumers from overseas online retailers operating outside of the rules. The system needs to evolve and hold all retailers selling to New Zealanders to the same standards of care." Callinan said "price match advertising gives the impression that customers will be able to show up and get a match for competitor's prices. "It's crucial that businesses promoting any price match offer factor in the overall impression of the claims they make, and that all information is clear to customers." The maximum penalty for breaches of the Fair Trading Act, is $600,000 per charge for businesses.
Otago Daily Times
20-07-2025
- Business
- Otago Daily Times
Noel Leeming 'perplexed' over misleading advertising charges
Photo: ODT Files The Commerce Commission has filed criminal charges against retailer Noel Leeming over what it says is a misleading price matching promotion. Noel Leeming is a subsidiary of The Warehouse Group. "For over a decade Noel Leeming has prominently promoted their 'Price Promise,' which is their commitment to match any competitors' price. We believe their price promise claim was misleading and in breach of the Fair Trading Act," Commerce Commission deputy chair Anne Callinan said. "We believe Noel Leeming's price promise had many limitations and conditions which weren't made obvious to customers and made any price matches difficult to obtain. "Fine print should not contradict advertising claims or be used to conceal important information which could be critical to a person's decision to buy goods or services." Noel Leeming chief operating officer Jason Bell said the company "firmly" maintained it had not committed an offence and would vigourously defend itself against multiple charges of misleading customers under the Fair Trading Act. "We're perplexed by the Commission's claim that price matches were difficult to obtain, when over 250,000 Kiwis saved money with our Price Promise between 2019-2021," he said. "Our terms and conditions are fair and presented just like other retailers, and when we can't price match, we often don't get the sale." Callinan said Noel Leeming had previously been one of the regulators most complained about traders involving a range of issues raised by consumers. The commission had also filed charges against Noel Leeming regarding promotions where the advertised product or price was different to what could be purchased. Other charges against Noel Leeming involved incorrect or misleading information about consumers' rights under the Consumer Guarantees Act, when customers complained about faulty products. "We expect big businesses to be clear and honest in their advertising," she said. "Consumers should be able to trust the information they receive when they are buying goods and services." The maximum penalty for a single breach of the Fair Trading Act was $600,000 for businesses.
NZ Herald
20-07-2025
- Business
- NZ Herald
Commerce Commission files charges against Noel Leeming over ‘Price Promise' claims
The Commerce Commission has filed criminal charges against retail electronics chain Noel Leeming for allegedly misleading customers with its "Price Promise". Photo / Supplied Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech. The Commerce Commission has filed criminal charges against retail electronics chain Noel Leeming for allegedly misleading customers with its "Price Promise". Photo / Supplied The Commerce Commission has filed criminal charges against retail electronics chain Noel Leeming for allegedly misleading customers with its 'Price Promise'. The commission alleges multiple breaches of the Fair Trading Act by Noel Leeming which is owned by The Warehouse Group. 'For over a decade Noel Leeming has prominently promoted their 'Price Promise,' which is their commitment to match any competitor's price. We believe their price promise claim was misleading and in breach of the Fair Trading Act,' Commerce Commission deputy chair Anne Callinan said. 'Price match advertising gives the impression that customers will be able to show up and get a match for competitors' prices… we believe Noel Leeming's price promise had many limitations and conditions which weren't made obvious to customers and made any price matches difficult to obtain.' Callinan said it is crucial businesses promoting any price match offer factor in the overall impression of the claims they make, and that all information is clear to customers.
