Fair Trading: Commerce Commission v. CityFitness

  

Disguising price increases for members as ‘transaction fees’ and ‘payment authority fees’ cost CityFitness $1.12 million, fined for breaching the Fair Trading Act.

The District Court was told of a calculated decision made in 2023 by CityFitness senior management to recover increased business costs without disclosing increased pricing in its headline advertising.

New members signing up were not told the extra ‘transaction fee’ loaded into weekly or monthly billing would be three per cent of their membership fee.

Existing members were unilaterally charged a ‘payment authority fee,’ adding three per cent to their existing fees.     

Commerce Commission investigated following complaints made by some twenty CityFitness members.

After investigation, it prosecuted CityFitness for breaching the Fair Trading Act; ‘misleading the public as to the nature or characteristic of the service provided.’

Evidence was given that the actual transaction cost on CityFitness billings was about forty cents for each credit card transaction, five cents for direct debits.

CityFitness admitted it was misleading to label its price increases as bank fees.  It denied acting dishonestly.

The Commission said its conduct was deliberate, deceitful and intentional.

CityFitness’ misleading pricing lasted for sixteen months, ending April 2025.

Evidence was given that Commerce Commission put CityFitness on notice in July 2024, with CityFitness failing to correct its advertising for a further nine months.

Judge Clark increased the fine imposed by fifteen per cent as an extra penalty to mark seriousness of the offending; noting CityFitness’ current financial position and ability to pay.

CityFitness annual turnover for the 2025 year was $120 million.  It holds an estimated forty per cent of the national gym membership market.

Commerce Commission v. CityFitness Group Ltd – District Court (5.06.26)

26.169

Money Laundering: Reserve Bank v. ASB

  

Failure to properly set up internal systems to identify possible money laundering cost ASB a $6.7 million fine after Reserve Bank intervention.

The High Court was told of ASB Bank persisting with inadequate software workarounds designed to automatically trigger alerts for suspicious transactions and then being overwhelmed by thousands of ‘false positives,’ many alerts left unexamined for months.

Evidence was given of ASB failing to implement improvements required after routine Reserve Bank audits and delaying purchase of software packages better able to provide monitoring required under the Anti-Money Laundering and Countering Financing of Terrorism Act.

‘Know your customer’ requirements imposed by money-laundering legislation has forced substantial costs on many businesses, particularly financial institutions where the volume and velocity of banking transactions can easily disguise the transfer of ill-gotten gains.

The High Court was told ASB Bank decided in 2012 to use its existing Predator software, designed to detect credit card fraud, as the prime means of detecting potential money laundering.

Predator proved singularly unsuited for this task, despite ASB re-setting parameters within which alerts would be triggered.

Extra staff, and eventually outside contractors, were taken on to follow up on the high volume of alerts generated.

Of some 120,000 Predator alerts involving transactions totalling nearly $12.1 billion, the longest period of time an alert remained unresolved was 1300 calendar days; for more serious high priority alerts, 520 working days.

This led to substantial delays in filing suspicious activity reports with the financial intelligence unit within NZ Police.

As banking industry supervisor, Reserve Bank was also critical of ASB’s limited oversight of transactions through bank accounts of those trusts having a foreign beneficiary; considered high risk as vehicles for money laundering.

Reserve Bank requires these customers to be monitored more frequently and in greater detail.

The High Court confirmed a $6.7 million fine negotiated between Reserve Bank and ASB.

Steps taken by ASB to deal with continued backlogs was patently inadequate and delays in remediation unacceptable, Justice O’Gorman said.

ASB undertook to keep Reserve Bank apprised of improvements to internal procedures.

Reserve Bank v. ASB Bank Ltd – High Court (3.06.26)

16.168