Jetstar feels ‘sting’ of rising Fair Trading Act fines

Tuesday, 2 September 2025

Jetstar is the second-largest fine in Fair Trading Act prosecution history.

ANALYSIS: A Fair Trading Act fine should “sting”, said Auckland District Court Judge Brooke Gibson as he fined Jetstar $2.25 million for misleading travellers over their right to compensation for cancelled, or delayed flights.

The fine, imposed at a sentencing hearing on Monday, was the second-largest fine in Fair Trading Act prosecutions history, behind the $3.675m fine for One NZ in 2023 but ahead of the $1.56m fine for Steel & Tube in 2018 for misleading claims about its steel mesh.

Gibson had been urged by Commerce Commission Te Komihana Tauhokohoko counsel Jacob Barry to impose a high sentence with deterrent power.

Barry said: “Penalties are on the way up.”

Courts now recognised large corporates needed large penalties to deter them from misleading their customers, Barry said.

Gibson agreed, saying on Monday: “It's generally accepted that swingeing fines are now imposed for deterrent purposes where serious corporate offending is involved.”

Commerce Commission chair John Small tells MPs about the low fines companies face for breaking the Fair Trading Act.

For many years, the sting didn’t seem to be there in Fair Trading Act fines.

Frustration came to a head in early 2023 when the commission appealed several penalties against large corporates it believed were manifestly too low for serious Fair Trading Act breaches.

One involved online marketplace GrabOne, which sold dangerously small, powerful magnets in 2021, despite the product being covered by an unsafe goods notice from the Ministry of Business, Innovation and Employment (MBIE).

An 11-year-old girl had to be rushed to the operating table for surgery after she swallowed several which attached to each other pinning tissue inside her body.

Tiny powerful magnets are dangerous when swallowed, and are banned for sale in New Zealand.

NZME Advisory, the owner of GrabOne, was initially fined $87,750 at the District Court, despite the company having set aside more than $200,000 expecting a much higher fine.

The commission appealed, and the High Court agreed the fine was too low and increased it in August of the same year to $195,000.

Some in the legal community saw that as being a moment in which a new direction was taken on Fair Trading Act fines.

“The High Court sent a clear message that penalties for these offences had become too low,” lawyers Misha Henaghan, Joseph Lill and Elliot Copeland from law firm Wotton Kearney said at the time. “Generally, fines should increase over time to ensure they maintain a deterrent effect, and this had not occurred in the FTA context. Stronger penalties are to be expected for these offences in future.”

The memory of the first GrabOne fine still stung when commission chair Dr John Small complained to MPs, including about the GrabOne fine.

Multiple governments had allowed the penalties breaching the Fair Trading Act to remain unchanged for nearly 20 years, he said.

In 2023 the commission also appealed the $2.25m fine imposed at the District Court on One NZ for misleading advertising, which then saw the fine increased at the High Court.

As recently as 2020, breaches of the Fair Trading Act, which covers product safety as well as banning misleading behaviour, saw large corporates receive relatively small that were barely a rounding error on their income statements.

In that year, Contact Energy was fined $245,000 at the District Court in Wellington for misleading its 550,000 customers about their rights under the then very popular AA Smartfuel fuel discounts reward scheme.

After the $1.5m fine, Kiwibank chief executive Steve Jurkovich said, ‘We apologise for the errors and are committed to continuing to build an even stronger New Zealand bank to help make more Kiwi better off.”’

Since that time, smaller companies have been fined similar or larger amounts for Fair Trading Act breaches, including tyre repairer Advantage Tyres (once called Beaurepaires), Bed Bath and Beyond, and Looksharp.

And late last year, Kiwibank was fined $1.5m after pleading guilty to systemic and long-running breaches of the Fair Trading Act that led to 35,000 customers being overcharged a total of $6.8m.

It wasn’t that larger fines were previously unheard of.

In 2017, cycle retailer Bike Barn was fined $800,000 for misleading advertising giving the impression that promotions were about to end, and that its “sale” prices were often no different from the prices it sold bikes before and after advertised sales. And the Steel & Tube fine had been imposed in 2018.

There might have been other tests for Fair Trading Act sentencing, but some cases involving misrepresentations by banks and insurers were prosecuted by the Financial Markets Authority Te Mana Tātai Hokohoko were taken under the fair dealing provisions in the Financial Markets Conduct Act.

Jetstar senior executives from Australia flew to New Zealand to attend hearings at the District Court in Auckland to demonstrate how seriously the airline took its failures.

They included AA Insurance New Zealand being ordered to pay a penalty of $6.175m for overcharging 112,463 customers a total of approximately $4.89m.

Others fined under the Financial Market Conduct Act’s fair dealing laws were: MAS fined $2.1m, Vero fined $3.9m, and Cigna fined $3.5m, and Westpac fined $3.25m.

When calculating Fair Trading Act fines, judges determine starting points based on the seriousness of the offending. In the case of Jetstar, the starting point for Judge Gibson was $2.5m. Companies and individuals then get “uplifts” and “discounts” depending on their behaviour.

The commission argued Jetstar, which had been in trouble at an earlier date for similar behaviour in Australia, had been reckless in its breaches of the Fair Trading Act, saying that should see an uplift of 25% in the sentencing.

It had, however, co-operated with the commission’s investigation, paid refunds, and entered an early guilty plea, and Gibson gave it credit for not having been prosecuted in New Zealand for similar, or any, breaches of the Fair Trading Act.

While people can get discounts for remorse, companies cannot said Judge Thomas Ingram at the District Court in Hamilton when sentencing dairy company Milkio for falsely claiming its products were made with 100% New Zealand ingredients.

“Limited liability companies have no conscience, and cannot be remorseful,” he said.

There appears to be another factor that can be given some consideration, whether a fine would put a company out of business.

When sentencing Milkio, Judge Ingram said: “I am satisfied from the material before me that the imposition of a penalty totalling $420,000 will not render the company insolvent.”

There will be upcoming tests of court sentencing in Fair Trading Act cases when penalties are imposed on supermarkets that didn’t take enough care that their shelf pricing was accurately reflected at the checkouts.

Two Pak ‘n Saves have pleaded guilty to breaching the Fair Trading Act, and are awaiting sentencing, while Woolworths faces similar action, but had not yet entered pleas.

The commission has an open investigation into whether Air New Zealand also misled travellers over their compensation rights.