The NZ Herald has reported that the “Christmas hamper company Chrisco Hampers Ltd was fined $175,000 in the Manukau District Court today after pleading guilty to breaching the Fair Trading Act by misleading customers about their cancellation rights under the Layby Sales Act, the Commerce Commission said.
This will be of particular interest to Maori whanau, who make up a large proportion of Chrisco customers. The company supplies food baskets/hampers and a large range of other products, such as electronics (cameras, stereos) as well a large household items such as lawnmowers. Payments are spread out over the year allowing families that would not normally be able to purchase such items the ability to layby them (generally at higher rates then you’d find in stores).
The Layby Sales Act gives customers the right to cancel at any time until the last payment and governs what a seller can charge a customer when they cancel.
However, between 2008 and 2010, Chrisco operated a cancellation policy where customers were charged 20 per cent of payments already made if they cancelled up to 90 days prior to the final payment date, if they cancelled within 90 days of the final payment date, that fee was increased to 50 per cent of payments already made.
Chrisco, following an investigation by the commission, pleaded guilty to 10 charges under the Fair Trading Act.
The breaches related to customers being misled about what they could be charged if they cancelled at a particular time, how they could cancel, and in some instances, at what point in time they could cancel.
“Chrisco’s cancellation policy meant that the company recovered more than it should have under the Layby Sales Act, so customers were overcharged,” Graham Gill, the commission’s competition manager, said in a statement.
As the fee was worked out as a percentage of payments already made, some customers ended up being charged hundreds of dollars. In a few cases the fee was as much as $800, he said.
As a result of the investigation, Chrisco reviewed and amended its cancellation policy to be 20 per cent of payments made with a cap of $250. It also retrospectively refunded about 750 customers a total of $141,735 using the amended cancellation policy.
“We are pleased that customers who were overcharged have been refunded. However, it is difficult to measure the extent of harm caused by Chrisco’s conduct,” Gill said.
“In addition to those customers who cancelled and were charged fees, there were customers who may have been put off cancelling when faced with the prospect of a large fee,” he said.
Chrisco also pleaded guilty to charges relating to its toys and gifts catalogue and its “Headstart” plan.
The catalogue said that customers could not cancel their contract after a certain date.
“This clearly breached the Layby Sales Act which allows cancellation at any time up to the last payment,” Gill said.
The Layby Sales Act entitles customers to cancel at any time up to the last payment. When orders are cancelled, sellers are entitled to recover their reasonable selling costs as well as the difference in retail value of the product.
A Consumer NZ survey last March found that the items in Chrisco’s “traditional” hamper could be bought online from Woolworths for $327.84 – about $83 less than Chrisco’s price of $10.53 a week for 39 weeks ($410.67).
Chrisco was founded by Britons Richard and Ruth Bradley, who built the now famous Chrisco mansion at Coatesville. The North Shore residence was later bought by the Kim Dotcom, the man now facing facing extradition to the United States on breach of copyright and other charges.
The Bradleys moved to Sydney about two years ago.
On its website, the Chrisco says the price customers pay includes the cost of collecting payments, special packing, delivery and GST.
The company says it does charge a little more than some supermarkets because of the extra costs.
Chrisco was established in 1977, and has supplying hampers in New Zealand since 1993.