Bed company fined over $69,000 for misleading consumers about cancellation rights

A company that sold high-priced “sleep systems” at invitational seminars has been fined $69,935 for misleading consumers about the right to cancel their contracts.

Wenatex New Zealand Limited pleaded guilty to 34 charges of breaching the Fair Trading Act (FT Act) and the Credit Contracts and Consumer Finance Act (CCCF Act).

Wenatex invited prospective customers to attend seminars at community centres where its beds and bedding were available for sale. Many of the people who attended the seminars were elderly or people looking for a health benefit. Customers were encouraged to enter into contracts to purchase bedding packages, often priced at around $5,000, with a large deposit payable at the seminar. Customers were given the option to pay the balance on delivery or on credit over several years.

Wenatex breached the FT Act by misleading customers about their cancellation rights under the Door to Door Sales Act (DTDS Act). When products are sold door to door or in other high pressure sales situations, such as invitational seminars, the DTDS Act recognises that consumers can make poor purchase decisions and gives them a “cooling off” period.

The cooling off period gives consumers the chance to cancel a contract and receive a full refund of any amount they have paid. Wenatex’s sales contracts did not set out this right of cancellation and, in addition, the contracts misled customers by stating that deposits were not refundable. When some customers legitimately attempted to cancel their contracts, Wenatex representatives told them that their deposits would not be refunded.
Customers who enter into payment arrangements to pay the balance over time also have cancellation rights under the CCCF Act. Wenatex also failed to include these rights in its sales contracts.

“Businesses need to be careful to ensure they don’t mislead customers about their consumer rights,” said Graham Gill, Commerce Commission Competition Manager. “It is fundamental that consumers are given complete and correct information when they enter contracts like this. A customer’s right to cancel the contract within a certain timeframe and receive any deposit back is an important right and needs to be clearly stated.”

Wenatex is a subsidiary of an Australian company, and when some customers tried to enforce their rights by ringing the call centre in Australia they were told they couldn’t cancel their contracts.

“Australian companies doing business here need to realise that some of our laws are different to Australian laws, but if they are here, they need to comply with New Zealand law. The Commission comes across this issue fairly often,” said Mr Gill.

Wenatex co-operated fully with the Commission’s investigation and pleaded guilty at the first opportunity. The Auckland District Court also ordered Wenatex to make refunds of $1,285 and to pay costs of $4,518.

A copy of the sentencing decision can be found on the Commission’s website at: www.comcom.govt.nz/fair-trading-enforcement-outcomes