In this round-up we deal with the recent media attention on whether New World has breached the Fair Trading Act through its Smeg knives promotion, and provide an update on the Commerce Commission’s ongoing market study into supermarkets. We also discuss the Commission’s consultation on its cartel leniency policy in advance of the April 2021 deadline for criminal penalties to come into force for cartel conduct.

Knives are out over Smeg promotion: What to keep in mind when offering gifts and prizes

Over the holiday period, New World has been running a promotion by which stickers can be redeemed for a range of six Smeg knives and a knife block. Customers can also collect fewer stickers and pay a cash top-up in exchange for a knife. However, according to a recent news article, New World has all but run out of the knife blocks and cannot source any more. As a result, an Auckland businessman has lodged a complaint with the New Zealand Commerce Commission (NZCC) alleging New World has breached the Fair Trading Act (FTA) by continuing to promote the giveaway despite there being no knife blocks left.

While we are yet to see any substantive response from the NZCC on the complaint about the Smeg promotion, this episode provides a timely reminder of how careful businesses need to be when running promotions, competitions or giveaways.  

Section 17 of the FTA specifically governs offering gifts and prizes. This section states that no person shall:

1. in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services;
    ....
   offer gifts, prizes or other free items with the intention of not providing them or of not providing them as offered.

In practice, this means businesses planning to run a competition or promotion should:

• Ensure any T&C’s are clearly stated - including time limits on the promotion, and the availability of prizes.
• Ensure gifts & prizes are described accurately - including what the prize is, and entrants’ chances of winning the prize.
• Make sure the cost of a “free” gift with purchase is not simply disguised by including it in the selling price of advertised goods.

In 2010 Panasonic fell afoul of this provision when it ran a “Million Dollar Summer” prize draw promotion. The headline implied that the prize, valued at $1,000,000, could actually be won. The NZCC were of the view that there was a high risk that the “two tier” nature of the prize draw was misleading and thus breached the FTA because there was only a remote chance that the headlined million-dollar prize could actually be won. Panasonic and the NZCC ultimately entered into a settlement agreement under which Panasonic agreed that the advertising of any future “two tier” or similar promotions will feature prizes which are guaranteed to be won.

In addition to section 17, the other provisions of the FTA such as those prohibiting misleading & deceptive conduct and bait advertising, among other things, also apply.

Market Study

New World and other supermarkets already have the NZCC’s attention at the moment as its market study into the grocery sector gathers steam.

The purpose of the study is to consider and evaluate whether competition in the grocery sector is promoting outcomes that benefit New Zealand consumers over the long term.

At the end of 2020 the NZCC released a Preliminary Issues Paper (PIP), which outlines the issues the NZCC may explore and the proposed scope for the study.

The NZCC are currently receiving submissions and feedback on the PIP from all interested parties. If you are an interested party wanting to make a submission, you can submit your feedback here. Submissions close at 4pm on 4 February 2021. The NZCC also intends to engage more directly with a range of stakeholders, including consumers and smaller suppliers and retailers in the course of the study.

Cartel Leniency Policy

The NZCC is also currently consulting on its amended Cartel Leniency Policy and Guidelines (Leniency Policy). The amended Leniency Policy deals with the situations in which a party to a cartel can obtain full immunity from NZCC civil and/or criminal proceedings for that conduct. The consultation is timely, given that criminal penalties involving jail sentences of up to 7 years will shortly kick in for cartel conduct from 8 April 2021.

A copy of the proposed amended Leniency Policy can be found here. The deadline for submissions is 10 February 2021.

Get in touch

If your business is planning a promotion, or if you are interested in submitting your thoughts on the market study or Leniency Policy, please get in touch with one of the contacts listed on this page.