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Michael Hill fined $169k over misleading warranties

Michael Hill New Zealand has been fined $169,000 in the Wellington District Court following an investigation by the Commerce Commission into its extended warranty.

The regulator says the jewellery retailer admitted 12 charges that its Professional Care Plan failed to comply with the extended warranty disclosure requirements of the Fair Trading Act between May last year and May this year.

The care plan includes various services aimed at prolonging the life and maintaining the appearance of jewellery purchased. But the documentation supplied to customers failed to include all of the required information on the front page.

Its omissions included comparing the protections consumers automatically have under the Consumer Guarantees Act with the protection Michael Hill’s plan offered, an adequate summary of consumer rights and remedies under that Act and a summary of the consumer’s right to cancel the plan.

Michael Hill also admitted a charge that it misled consumers by adding the cost of its plan onto the price of a bracelet without the knowledge of the Whangarei couple who bought it in June 2016. They were later refunded the cost of the plan after they complained to Michael Hill.

“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,” Rawlings said.

“They can then decide whether it is worth the extra cost.”

The cost of extended warranties should be made clear and, when it is not, consumers who purchase these products may be able to cancel their agreements and obtain a refund, she said.

Judge Denys Barry said in sentencing that the conduct was “a significant set of failings, not a mere minor oversight”. It also “impugns the objectives of the Fair Trading Act as consumers had no immediately discernible comparison between their rights” under the Act compared with Michael Hill’s plan.

“The financial harm to the couple was caused by the conflation of the warranty price with the price of the bracelet. The consumers were effectively ‘gulled’ into paying for the warranty product.”

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