Skip to main content

Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

SimplifiedLaw.co.nz
consumer

Bait advertising: What it is and why it's illegal

Key Takeaway

Bait advertising, an illegal practice in New Zealand, involves advertising goods or services at attractive prices or terms to lure customers, intending to sell them a more expensive alternative. It is prohibited primarily by the Fair Trading Act 1986, which outlaws misleading and deceptive conduct concerning product availability, price, and features, ensuring consumers can make informed purchasing decisions.

Understanding Bait Advertising in New Zealand

New Zealand consumer law aims to protect consumers from unfair trading practices and ensure they can make informed purchasing decisions. One such practice, known as bait advertising, is specifically prohibited to maintain fairness and transparency in the marketplace.

What is Bait Advertising?

Bait advertising is a marketing practice where a business advertises goods or services at a very low price or on very attractive terms to attract potential customers, but without intending to sell those advertised items in reasonable quantities, or intending to use the advertisement to sell different, often more expensive, products or services instead [Source: Fair Trading Act 1986, s 13(e), s 13(a)]. The advertised item, often called the 'bait,' may have limited stock, be difficult to find, or not be readily available when customers attempt to purchase it. The primary goal is to 'bait' customers into the store or onto a website and then 'switch' them to a different, less attractive, or higher-priced item.

Examples of bait advertising can include:

  • Advertising a product at a significantly discounted price, but only having one or two units available in-store, or claiming it sold out immediately.
  • Promoting a service with an unusually low introductory offer, then pressuring customers into a more expensive package once they inquire.
  • Displaying an item online at a low price, but when a customer clicks to buy, they are directed to a different, more expensive model or are told the advertised item is 'out of stock' and offered alternatives.

Bait Advertising and the Fair Trading Act 1986

The Fair Trading Act 1986 (FTA) is the principal legislation in New Zealand that prohibits misleading and deceptive conduct in trade. Bait advertising is illegal under several provisions of this Act.

Specifically, the FTA prohibits:

  • Misleading and Deceptive Conduct Generally: A person in trade must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. Bait advertising inherently falls under this general prohibition because it creates a false impression about the availability or true price of goods or services.
  • False or Misleading Representations: The FTA also specifically prohibits making false or misleading representations about various aspects of goods or services. This includes representations about the standard, quality, grade, quantity, composition, style, or model of goods [Source: Fair Trading Act 1986, s 13(a)], and, critically for bait advertising, representations about the price of goods or services [Source: Fair Trading Act 1986, s 13(e)]. Advertising a price for an item that is not genuinely available in reasonable quantities at that price constitutes a misleading representation.

Why is it Illegal?

Bait advertising is illegal because it undermines consumer trust and fair competition. It wastes consumers' time and money, and it manipulates them into considering products they did not originally intend to buy. The law ensures that consumers are provided with accurate information to make informed choices [Source: Fair Trading Act 1986, s 9, s 13].

Consequences for Businesses

Businesses found to be engaging in bait advertising can face significant penalties. The Commerce Commission, New Zealand's competition and consumer protection agency, can investigate such practices. If a business breaches the FTA, it may be subject to fines, which can be substantial for individuals and corporations, and other enforcement orders [Source: Fair Trading Act 1986, s 40, s 43].

The Consumer Guarantees Act 1993 and Bait Advertising

The Consumer Guarantees Act 1993 (CGA) provides consumers with guarantees for goods and services they purchase for personal, domestic, or household use. While the FTA primarily addresses the conduct of businesses before a sale (like advertising), the CGA focuses on the quality and performance of goods and services after a sale has occurred [Source: Consumer Guarantees Act 1993, s 1A].

Although the CGA does not directly prohibit bait advertising, it provides important rights if a consumer does purchase an item after being subjected to a bait advertisement. For example:

  • Goods must match description: If a consumer is ultimately sold a product that does not match the description of the 'bait' product, the goods may not comply with the guarantee as to compliance with description [Source: Consumer Guarantees Act 1993, s 9].
  • Acceptable quality: If the product eventually purchased (whether the original bait or a substituted item) is not of acceptable quality, the consumer has rights under the guarantee as to acceptable quality [Source: Consumer Guarantees Act 1993, s 6].
  • Reasonable price: If the 'bait' price was misleading and the consumer ended up paying a significantly higher, unreasonable price for a substituted good or service, the CGA might offer some recourse concerning the price charged for services [Source: Consumer Guarantees Act 1993, s 30].

In essence, the FTA prevents the misleading practice of bait advertising, and if a transaction still occurs, the CGA ensures that the goods or services supplied meet certain standards and guarantees.

Consumer Rights and Remedies

Consumers who believe they have been subjected to bait advertising have rights. They can report misleading conduct to the Commerce Commission for investigation. Additionally, if they have suffered loss or damage due to misleading conduct, they may be able to take action under the Fair Trading Act to seek remedies such as damages [Source: Fair Trading Act 1986, s 43]. If a purchase was made and the goods or services do not meet the standards required by the Consumer Guarantees Act, consumers may have rights of redress against the supplier, including repair, replacement, or a refund [Source: Consumer Guarantees Act 1993, s 18].

When to Seek Independent Legal Advice

Individuals seeking specific guidance regarding a situation involving bait advertising or any consumer law matter should consult with an independent legal professional. Further assistance can be obtained from official bodies like the Commerce Commission for complaints regarding unfair trading practices, or by contacting Community Law Centres for free legal advice across New Zealand.

Key Resources