2 Cheap Cars fined nearly $500k for 'devious' behaviour

Wednesday, 10 July 2019

Eugene Williams is chief executive of 2 Cheap, which has been handed a large fine for ads that were 'tantamount to devious'.

Used car dealer 2 Cheap Cars Limited has been fined $438,000 for misleading its customers.

The Commerce Commission took the company to court over its 'warranty waiver' documents and a liquidation sale.

The waiver documents misled buyers about the rights they had to rectify problems with a purchase.

The documents said that they would not get a warranty of any kind, and that although 2 Cheap Cars would comply with the Consumer Guarantees Act, the buyer would 'prefer to be' solely responsible for repair bills.

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In fact, consumers had the protections of the Consumer Guarantees Act (CGA), which applies to used and new goods, including vehicles.

It also ran a 'liquidation sale' in September and October of 17 in advertising for which it said the business was in 'hot water'.

But most of the 710 vehicles then for sale nationwide were not discounted at all or had discounts of as little as $5, and 2 Cheap Cars was not in, or going into, liquidation.

In January 2017 2 Cheap Cars' newspaper advertising included the phrase '84 per cent off'. The discount was not off the price of a vehicle but off the price of a $300 GrabOne voucher that could then be used towards purchasing a vehicle.

In a written sentencing decision, Judge Robert Ronayne in the Auckland District Court said this behaviour was 'misleading and careless and, when viewed as a complete advertisement, tantamount to devious'.

The judge said the company made annual profits of more than $3 million and the court's response 'should not amount to what might be considered a mere licensing fee or cost of doing business'.

The judge said the waiver was 'blatantly untrue and misleading' and that '[b]y means of misinformation and untruths' the waiver created an impression that unless an extended warranty was purchased 'the purchaser had no rights. This must have been designed to encourage (unlawfully) the purchase of insurance product,' he said.

The commission estimates that consumers signed in excess of 20,000 warranty waivers during the charge period.

2 Cheap Cars stopped using them in December 2017 after being notified of the commission investigation.

The judge said the liquidation advertising was 'deliberately misleading rather than simply careless' and a 'complete departure from the truth'.

Commission chairwoman Anna Rawlings said 2 Cheap Cars misrepresented consumers' rights under the CGA.

The company should not have told customers they had no warranty of any kind and it should not have attempted to limit its liability for repairs in the way that it did, Rawlings said.

'Conduct such as this puts pressure on customers to buy an extended warranty and deters them from returning to the seller for help if something goes wrong, even though they may have rights under the CGA.

'As judge Ronayne notes, 2 Cheap Cars would have profited by avoiding its obligations to repair,' she said.