One of New Zealand’s biggest gym chains has been fined $1.12 million for misleading customers about the true cost of its memberships.

CityFitness was convicted after charging new members a compulsory fee while advertising prices that did not include the extra cost.

The Commerce Commission filed charges in September last year following an investigation into the company, which has an estimated 40% share of the New Zealand gym market.

Commerce Commission Deputy Chair Anne Callinan said CityFitness had advertised memberships from $6.99 a week while also charging a compulsory 3% “transaction fee” to new members.

“CityFitness continued to advertise this price even after introducing a 3% ‘transaction fee’.

This fee was compulsory for all new members, meaning the gym was attracting customers by publicising a price that did not actually exist,” Callinan said.

“The 3% fee was charged to over 125,000 members and created approximately $1.6 million of additional revenue for CityFitness.”

Callinan said the company had also misrepresented the purpose of the charge.

“This created a misleading impression that the fee was a surcharge related to a customer’s choice of payment. Our investigation found its actual purpose was to lift overall business revenue,” she said.

In sentencing, Judge David J Clark said senior executives made decisions to increase membership costs in a way that misled customers.

“City Fitness needed an increase to cover the increasing operating costs but rather than fully disclosing this to its members, it chose to achieve this through a mechanism which was patently false in terms of its true purposes,” Judge Clark said.

“The decision to use the labels of ‘transaction fee’ and ‘Payment Authority Fee’ were approved at the highest levels where the concerns were more focused on marketing and competition outcomes, rather than protecting consumers by making full and frank disclosures as to why membership fees needed to be increased.”

“There was an intent by CityFitness to mislead or deceive potential members by not disclosing the true nature of the transaction fee and disguising this fact.”

Judge Clark said the company prioritised its commercial interests over consumers.

“CityFitness disregarded the rights and interests of potential members in preference to looking after its own commercial interests. A falsehood was created to do this.”

“Although there is nothing wrong with a business protecting itself against high inflationary costs, it must do so in a manner which is responsible, coherent with market practice, and consistent with Fair Trading Act principles.”

Callinan said businesses must be transparent with customers.

“If you are applying a surcharge, you must be upfront and honest about what the surcharge is for. Likewise, advertised prices must not mislead customers about the full and final cost of a product or service,” she said.

“We will continue to uphold Kiwis’ rights and pursue businesses that mislead customers and try to gain an unfair advantage over their competitors by publicising prices that are not what they seem.”

Background:

The offending occurred between 21 December 2023 and 30 April 2025.

CityFitness pleaded guilty to eight charges under section 11 of the Fair Trading Act relating to misleading advertising on its website, Instagram and Google ads.