The Michael Hill company has been fined for breaches of the Fair Trading Act. (File photo)

A couple who bought a bracelet from jewellery firm Michael Hill found they had also bought a $149 extended warranty without knowing it.

Now the company has been fined $169,000 for breaching the Fair Trading Act and misleading the buyers about the price.

The Whangarei couple had been told by a staff member the bracelet was going on sale in a week and she could give it to them at the sale price but had to send them the receipt after the sale begun.

They agreed but when the receipt arrived they found the $1803 they had paid included $149.90 for a professional care plan or extended warranty that they had not agreed to.

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On Thursday, Michael Hill New Zealand Ltd. pleaded guilty to 12 charges of breaching the Fair Trading Act by not complying with how extended warranties should be set out and one charge of making a false or misleading representation about the price of a bracelet in June 2016.

Wellington District Court judge Denys Barry fined the company $144,000 on the breaches of the Fair Trading Act. The charges are infringement offences and do not carry convictions.

He convicted the company on the charge of misleading, and fined it another $25,000.

BENN BATHGATE/STUFF Michael Hill was fined $144,000 for its breaches of the Fair Trading Act and another $25,000 for misleading. (File photo)

In a statement, a spokesperson for Michael Hill said the company had been "fully cooperating" with the Commerce Commission and while they chose not to contest the technical classification of a Professional Care Plan (PCP) as an extended warranty in this case, they would continue to use the plans in future.

"PCP continues to be a unique and valuable servicing arrangement which entitles our customers to services beyond those under the Consumer Guarantees Act. We will make the necessary changes to our sales brochure to reflect the extended warranty classification, which include a comparison table within the terms and conditions to clarify and differentiate the protections of the Consumer Guarantees Act and the unique benefits and services of a PCP.

"This was an isolated incident where a refund was previously provided to the customer within a fortnight of their purchase, once the Company became aware that the sales professional may not have followed the correct procedure on this specific occasion," the spokesperson said.

The Commerce Commission took a snapshot of a year to show that there were 76,306 warranties in 12 months with total sales of $8.8 million that had the potential to cause detriment to the consumers, the judge said.

"In this case, the consumer was guiled into paying for the warranty without knowing they were doing so or being given the choice."

While there was potential for more loss, this had been a single incident by a rogue employer who did not follow the procedures Michael Hill had laid out, the judge said.

"The sins of the employees are to be visited on the principal. It was a one-off in that sense."

The warranty itself did not have all the information the customer would have needed, the judge said. It did not make a comparison between what was offered by the warranty or the Consumer Guarantees Act (CGA) and did not give full information about the customer's right to cancel.

The judge said the company did have processes in place, did provide a refund to the couple and had cooperated with the Commission.

Michael Hill New Zealand Ltd's lawyer Linda Clark said it was not the case that the company had been highly careless.

There was information available and the company offered a longer cancellation time than required by law.

It was accepted, however, that it was not an adequate summary of customers' rights, she said.

The company had no previous convictions.

'A SIGNIFICANT SET OF FAILINGS'

SUPPLIED Commerce Commissioner Anna Rawlings said the law clearly sets out the information that must be provided to consumers when selling an extended warranty.

Commenting outside court, Commerce Commissioner Anna Rawlings said the judge had described Michael Hill's transgressions as a significant set of failings, not a mere minor oversight.

In this case, the consumers had no immediately discernible comparison between their rights under the CGA and those covered by Michael Hill's Professional Care Plan (PCP), she said.

"The financial harm to the couple was caused by the conflation of the warranty price with the price of the bracelet. The consumers were effectively guiled into paying for the warranty product."

The law clearly sets out the information that must be provided to consumers when selling an extended warranty, Rawlings said.

"That information helps consumers to decide whether an extended warranty offers them value over and above the rights they already have under the CGA. They can then decide whether it is worth the extra cost," she said.

"The cost of the extended warranty should be made clear. Where the required information is not provided, consumers who purchase these products may be able to cancel their agreements and obtain a refund of the cost of the warranty."

Consumer NZ head of research Jessica Wilson said while it was good to see the jeweller held accountable for its actions, existing penalties in the Fair Trading Act weren't providing sufficient deterrent against the mis-selling of warranties.

"A $30,000 fine is not enough of a deterrent."

She advised consumers to "steer clear" of extended warranties and instead save their money.

WHAT IS A PROFESSIONAL CARE PLAN?

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According to the Commerce Commission, Michael Hill's Professional Care Plan (PCP) includes various services to prolong the life and maintain the appearance of jewellery items.

In this case, the PCP documents supplied to the customers failed to include all of the required information on the front page, including: