Four breaches of Fair Trading Act cost Cellular One $8,535
Published24 Jun 1996
Pacific Telephones Ltd, which trades in Christchurch as Cellular One, has been fined $7,500 plus costs of $1,035 today after pleading guilty in the Christchurch District Court to three charges of misleading customers about the cost of cellphones and one of not having cellphones available as advertised.
Commerce Commission Chairman Dr Alan Bollard said the Commission prosecuted Cellular One under the Fair Trading Act.
Cellular One advertised Motorola cellphones for $89 plus GST, $49 and $99. None of the advertisements disclosed a compulsory additional $100 plus GST connection fee and a $133.50 plus GST penalty fee charged if the phone was disconnected from Cellnet Mobile Services network within two years.
During the two-year contract, there would also be between $850 and $1,700 of access and service fees extra to the cost of making phone calls.
Cellular One required all Motorola cellphones to be connected to Cellnet Mobile Services. In return, it received a significant subsidy from Cellnet Mobile Services.
The second charge arose because the advertisements which offered cellphones for $49 and $99 had distorted and shrunk the phrase "+GST" so that it appeared part of and was concealed within underlining.
The third charge related to an advertisement that described the cellphone price as "slashed" to $99. However, the same model had been available the day before at $49 and 15 days before at $89.
The fourth charge arose from the advertisement offering cellphones for $49. After a complaint that a cellphones were not available as advertised, Commission staff interviewed a Cellular One director who said he could not say how long the offer would last and that offers might last only one day.
The director said it was absurd for customers to make judgments based on advertising. He said the advertisements were small, most people would not read them and shop staff would discuss conditions, connection fees and disconnection penalties with customers.
Dr Bollard said there have been several court rulings, including one from the Court of Appeal, that it is not a defence to say that a misleading claim made in advertising would have been corrected at the point of sale.
"All advertising must be complete, clear and accurate," Dr Bollard said. "Leaving out important conditions, hiding information in the design of an ad, making false claims about savings and having vague limits on an offer can all lead to breaches of the Fair Trading Act.
"Customers need good information so they can make informed buying decisions. In turn, their decisions help healthy competition develop."
