Commission brings 7 high profile fair trading cases in as many weeks
The Commerce Commission (Commission) has brought proceedings against 7 (mostly) well-known companies – peer-to-peer lender Harmoney, Youi, Trustpower, 123 Mart, Budge, Godfreys and Bike Barn – since 1 August this year, alleging various breaches of the Fair Trading Act 1986 (FTA). A number of the defendants have pleaded (or are expected to plead) guilty to their respective charges.
The charges are varied, and include allegations of:
- sending misleading loan pre-approval letters (Harmoney);
- engaging in misleading sales techniques when selling insurance policies (Youi);
- misleading advertising in relation to a bundled electricity and unlimited data broadband offer (Trustpower);
- failing to meet mandatory product safety standards (123 Mart);
- misrepresenting how much alpaca fibre was in duvets (Budge);
- failing to comply with the written disclosure requirements for extended warranty agreements (Godfreys); and
- misleading consumers over sale prices (Bike Barn).
The latest prosecutions illustrate another year in which the Commission has actively (and pro-actively) investigated potential breaches of consumer laws, particularly where there may be vulnerable consumers. In some cases, they also highlight industries that appear to be “repeat offenders” under New Zealand’s fair trading laws. For example, in its 24 August announcement that Budge and its sole director, Sun Dong Kim, had been convicted and fined a total of $71,250 in the Auckland District Court, the Commission noted that it “has previously prosecuted nine companies and eight individuals for selling imported alpaca rugs as “Made in New Zealand”, and for claiming duvets were predominantly alpaca or merino wool when they were not.” Mobile “truck stops” have also been a focus for the Commission, with charges being laid under both the FTA and Credit Contracts and Consumer Finance Act 2003 in many cases.
The Commission’s prosecutions have also resulted in significant fines. Just last week, Vodafone was fined $165,000 after pleading guilty to making false price representations in relation to invoices sent to customers who signed on to the ‘Red Essentials’ mobile phone plan between January and December 2014. This was Vodafone’s 4th sentencing under the Fair Trading Act in the past five years, with previous fines of $82,000 and $400,000 in 2011, and $960,000 in 2012 (in relation to various broadband and mobile phone promotions). Vodafone also paid out over $260,000 to customers in a settlement reached with the Commission concerning the company’s promotion of its “Broadband Lite” service in 2014.
Commission reviews energy retail contracts for potentially “unfair” contract terms
The Commission has recently released a report detailing the findings of its “unfair contract terms” review in the retail energy sector. Nine energy retailers were included in the review.
Commissioner Anna Rawlings noted that “The majority of the nine energy companies included in the review had made real efforts to comply with the provisions before they were introduced. However, we did identify 59 terms that we considered potentially unfair. Many of the terms were common across the contracts, particularly those that limited the liability of the company, allowed the company to unilaterally vary the contract or automatically renewed fixed term contracts unless the customer opted out”.
Some of those terms were justified as necessary to protect the legitimate business interests of the company, and the rest have (or will be) amended.
This is the second sector to have its standard form consumer contracts subject to close scrutiny, following the Commission’s review of the telecommunications sector earlier this year. In that review the Commission identified 66 potentially unfair contract terms, all of which were either justified by the companies involved or amended to the satisfaction of the Commission.
The Commission has identified “credit” and “gyms” as other sectors where it will be focusing on unfair contract terms.
Another airline warned over “opt-out” pricing
The Commission has issued a formal warning to AirAsia after it agreed to end its pre-selection of checked baggage and change how it discloses its processing fee when selling flight tickets to New Zealand customers online. In making the announcement, Commission Chairman Dr Mark Berry noted the Commission “have been proactive about tackling opt out pricing, with the travel industry a particular focus for us”.
Over the last 18 months a number of New Zealand businesses have voluntarily put an end to their “opt-out” practices after a public call from the Commission to “scrap” the potentially misleading conduct. Air New Zealand was the first company to end such practices (in its case, the “pre-selection” of travel insurance) as a result of the Commission’s inquiries, followed by House of Travel, Naked Bus, Dash Tickets and Ticket Direct. Jetstar also gave court enforceable undertakings in March this year ending the “pre-selection” of a number of its services.
While the Commission has noted that it “does not have any further ongoing investigations into this issue at this time”, this issue appears unlikely to have run its full course and there may be further industries outside of travel that pique the Commission’s interest.
Commerce and Consumer Affairs Minister officially launches “redeveloped” Consumer Protection website
On 2 September Commerce and Consumer Affairs Minister Hon. Paul Goldsmith officially launched the redeveloped Consumer Protection website, www.consumerprotection.govt.nz. The launch formed part of the September meeting of the Consumer Protection Forum, which brings together managers from government agencies, non-government organisations and the private sector as part of a collaborative approach to protecting consumers.
The Consumer Protection website is a “plain English” resource that provides helpful guidance and advice on consumers’ rights, including under the FTA, Consumer Guarantees Act, and Credit Contracts and Consumer Finance Act.
Mr Goldsmith commented that “All New Zealanders can use this website to access straight-forward content about what needs to be done before, during and after purchasing a product or service […] It is important for consumers to know what their rights are when buying products or services. This new resource will assist everyone to become more familiar with those rights.”