The commission said under aviation law customers must be reimbursed when flights were disrupted for reasons within an airline's control, such as staffing and mechanical issues.
Costs that may be reimbursed included meals, accommodation or replacement travel.
The commission claims Jetstar discouraged consumers from seeking compensation and likely denied legitimate claims in 2022 and 2023.
In a statement, general manager Vanessa Horne said airlines should not mislead their customers.
"The Commerce Commission expects large businesses to take their responsibilities under the law seriously - they must honour their obligations to consumers."
The Jetstar website allows people to resubmit claims for compensation which may have been incorrectly handled at the time.
The commission encouraged any consumers who may be eligible to submit to do so.
In a statement, Jetstar said it was cooperating with the commission and apologised for errors made regarding compensation in 2022 and 2023.
"We're deeply sorry to have let our New Zealand customers down by errors made in assessing some compensation claims for disrupted flights in 2022 and 2023, as our operations restarted following Covid.
"Since becoming aware of this issue, we've been focused on making things right for our customers and improving our communication and processes."
It was working through past claims and contacting customers to ensure they are reimbursed. Any further claims could be made on the Jetstar website.
