City Fitness has faced court claims accusing it of misleading customers about its membership pricing.
The Commerce Commission said the advertised fees excluded a compulsory transaction charge, which should have been included in the total price.
The fitness giant was hit with 16 charges under the Fair Trading Act.
The commission also argued that describing the 3% charge as a “transaction fee,” despite it not reflecting the actual cost of processing payments, was misleading.
The commission’s lawyer, Jacob Barry, characterised it as a calculated marketing tactic. He said nearly 200,000 people were impacted by the charges over a 16-month period.
“City Fitness obviously saw there was a competitive benefit in pursuing it this way,” Barry said.
“It gets the benefit of the market, being able to sell its memberships with that attractive-looking number, but it’s doing that in a false way and, in my submission, in a consciously false way.”
The fee brought in just under $1.6 million over that period, which Barry said was improperly obtained.
Barry also said City Fitness continued promoting the membership price even after being notified of the Commerce Commission’s investigation, calling the conduct reckless.
City Fitness representative James Every-Palmer KC argued the gym chain had not misled customers and said that by the time payments were made, customers would have been aware of the fee.
“It arose out of good intentions from City Fitness to keep prices as low as possible; however, they fell down through a flawed implementation,” he said.
“But, on the other hand, there’s no evidence that a single consumer has suffered actual harm, had ended up signing up without knowing about the fee, or would’ve signed up if the transaction fee had had a different label.”
Every-Palmer said there was no evidence of deliberate deceit.
“I’ve heard today that the commission says the most serious thing here is that general cost recovery, including the cost of processing transactions, was recovered through a transaction fee and that that dwarfs the unobtainable price problem,” Every-Palmer said.
“But there’s simply no evidence that that was a deliberate attempt to mislead people, that that was, in some way, meant to make them think that that was their actual cost of transacting, and there’s simply no evidence that it made any difference to anyone…”