Refunds sought for customers after failure to disclose early termination fees
Published20 Dec 2021
The Commerce Commission has filed proceedings at the High Court in Auckland against Callplus Services Limited, Orcon Limited and Switch Utilities Limited – all subsidiaries of the Australian Vocus Group Limited. The companies supply power and broadband services in New Zealand under the Slingshot and Orcon brands.
The Commission alleges the companies breached s 36L of the Fair Trading Act 1986 by failing to adequately disclose early termination fees of between $130 and $250 when entering uninvited direct sale agreements with consumers for broadband and power services between 17 June 2014 and 20 June 2020. Section 36L requires written disclosure of the total price payable, and any other consideration to be given, on an uninvited direct sale.
Through this High Court civil proceeding, the Commission seeks refunds for up to 5,222 affected customers who were charged early termination fees, worth a total of approximately $1,017,621.
As this matter is now before the Court, the Commission will not comment further at this time.
The Commission has also issued a warning to Callplus Services Ltd, trading as Slingshot and Orcon for likely breaching the law when it wrote to 20,533 in-contract customers in January 2019 advising it was increasing the monthly broadband price by $1.
The terms and conditions of those customers’ contracts stated that charges would not go up unless the increase was “as a result of a change in the price from a supplier for an input required for your Slingshot Broadband Service”.
The Commission considers that the conduct is likely to have breached the Fair Trading Act because it represented to in-contract customers that it had a right to increase prices by that amount when it did not.
Direct input costs required for broadband services had increased by between 27 and 33 cents per month, less than a third of the price increase charged to customers. The majority of the price increase covered indirect anticipated costs averaged out across all customers – including things such as fault call out fees and installation charges.
Commission Chair Anna Rawlings said, “Businesses must ensure that any representations they make to consumers, particularly those about pricing, are not at risk of misleading their customers about the rights and obligations contained in contract terms and conditions.”
Callplus responded to the Commission’s concerns by updating the terms and conditions of its contracts to clarify the circumstances in which it may increase prices for in-contract customers, and the rights that a contract variation would trigger for those customers. It has also taken steps to refund in-contract customers who terminated their agreements and were charged early termination fees following the January 2019 price increase.
There is a range of resources on the Commission’s website explaining the obligations of businesses and the rights of consumers under the Fair Trading Act, including on standard form consumer contracts and representations relating to pricing.
A warning letter
A warning explains the Commission’s view of the conduct and does not constitute a finding of non-compliance with the Fair Trading Act. Only the courts can decide whether a breach of the law has occurred.
Commission warns Spark for misleading in-contract customers