Staying on the right side of Consumer Law

New World Smeg Knives Saga

New World’s recent and most popular ever promotion has caused quite a stir! Shoppers around New Zealand have been scrambling to collect stickers which can be earnt by shopping at New World in order to redeem them for Smeg knives and knife blocks.

Outrage followed when New World ran out of knife blocks part way through the competition, meaning customers could not complete their knife sets. It is reported that New World cannot get any more knife blocks as they were manufactured overseas in a limited run.

Many customers are disgruntled and more information continues to come to light. One employee of a New World store in Auckland has reported that workers were encouraged to take down the knives from the instore Smeg display, store them in drawers at checkouts, and only give them to “regulars” or people employees recognise as shopping at the store often. At least one customer has complained to the Commerce Commission, alleging that New World has engaged in misleading and deceptive conduct and breached the Fair Trading Act. The complainant says it is misleading that New World has no knife blocks left and does not intend to get any more in, but they are still running the promotion.

New World’s owner Foodstuffs says it is confident it hasn’t breached the law. However Consumer NZ says the man may have a case and New World stores that have run out of stock should be posting signs to warn customers before they buy groceries in the hope of securing one.

The Fair Trading Act is an important consumer law which protects the interests of customers by prohibiting unfair conduct in trade, such as false or misleading advertising. The most frequently referred to section of the Act prohibits misleading or deceptive conduct. Interestingly, to run into trouble with this section conduct need only be likely to mislead or deceive. It is not necessary to prove either that someone was actually misled or deceived or that there was any intention to mislead or deceive.

The Act also prohibits ‘bait advertising’. This is when goods or services are advertised at a certain price yet the seller has no intention of supplying or cannot reasonably supply the goods or services at that price in the quantity that will reasonably be demanded by the market. This is arguably what New World has done with the Smeg knives and may form part of the Commerce Commission’s investigation.

The Act prohibits a rage of unfair conduct that could undermine business confidence and consumer trust. With an increase in multi-level marketing and similar money-making schemes, it is interesting to note that ‘pyramid selling schemes’ are also illegal under the Act. A pyramid selling scheme is any scheme that is likely to be unfair because for some participants the financial rewards are dependent on them recruiting a large number of further participants. Some multi-level marketing schemes teeter on the edge of this dangerous territory.

The Act’s consumer protections are so important that some breaches of the Act are criminal offences.

We will have to wait and see how the Commerce Commission decides on whether New World’s Smeg promotion breached consumer law or not. Either way, one would hope New World will be more prepared when it rolls out its next promotion.

The Fair Trading Act is an important consideration for businesses. The Act should be paid attention not only when running promotions or advertising, but across a business’ wider activities. Remember, if something sounds too good to be true, it probably is, or it at least warrants a closer look at the Fair Trading Act.

If you need advice on Consumer Law or the Fair Trading Act contact our Business and Commercial Law Team.

Author: Rochelle Farmer