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Gyms to shape up after Commission review into unfair contract terms

21 August 2017

Gyms have agreed to amend their standard form contracts after a Commerce Commission review into unfair contract terms in the sector.

The Fair Trading Act bans contract terms which create a significant imbalance of rights or obligations between companies and consumers.

Gyms are the third sector to be reviewed by the Commission, following reviews into retail telecommunications and energy contracts. Commissioner Anna Rawlings said the sector generates a range of consumer complaints, with more than 700,000 New Zealanders belonging to a gym or fitness centre.

The review considered 10 standard membership agreements from a range of small and large providers nationwide including Anytime Fitness, City Fitness, Club Physical, Configure Express, Jetts, Les Mills, Next Generation, Snap Fitness, and Loft 45. It also looked at the Debitsuccess template contract a range of smaller gyms use.

“Our review identified a number of potentially unfair terms across the contracts. These included onerous liability provisions where gyms’ tried to exclude all liabilities to customers for damage or loss to members’ property, as well as provisions allowing the gym to unilaterally vary their location and services. A number of the contracts were also not written in plain English and contained complicated and onerous cancellation processes and notice provisions,” Ms Rawlings said.

“We’re satisfied with the response from gyms to our concerns, with all providers demonstrating a desire to comply with the law, either justifying how the terms are necessary to protect their legitimate business interests or agreeing to amend their contracts. For some it prompted a complete rewrite of their contracts.”

“We’re particularly pleased to see gyms amending their termination clauses and associated fees. This includes some gyms reducing their 30 day notice periods for cancellations outside any minimum term down to between 7 and 14 days. Some gyms also amended provisions relating to their liability to members, and variation clauses about their location and the services they offer.”

The Commission has provided compliance advice letters to all gyms involved in the review reminding them of their obligations under the Fair Trading Act. It also encourages gyms that were not involved in the review to consider their own contracts in light of the information provided in the report.

Background

The gym report is the third review by the Commission into unfair contract terms under the Fair Trading Act. Our reports on the telecommunications and the energy retail sectors can be found on our website.

Under the unfair contract term provisions, only the Commerce Commission can ask a court to make a declaration as to whether a term is unfair. If a court decides a term is unfair, a business cannot enforce it. If a business continues to use a term that has been declared unfair by a court, it is liable for prosecution by the Commission.

If consumers wish to complain about a potentially unfair contract term, they should contact the Commission on 0800 943 600 or fill out a complaint form.

Traders and consumers can read more information about unfair contract terms in our guidelines and consumer fact sheet.