"There is a big problem with cellphone promotions," Commerce Commission Chairman Dr Alan Bollard said today.

As the Commission prosecutes another cellphone retailer for allegedly breaching the Fair Trading Act, and launches a strategy to get compliance with the Act in the industry, Dr Bollard said that breaches appear to be frequent in this industry.

He said that a prosecution has been filed in the Auckland District Court against a nationwide cellphone retailer. The Commission is alleging that the company breached the Act by making misleading claims about cellphone prices and contract terms. A hearing date has not yet been set.

The Commission's legal advice is that it cannot yet release the company's name.

The Commission is also continuing court action against Ben Rumble Communications Limited and Bennie Arthur Rumble in the Christchurch High Court. The Christchurch District Court had previously found Mr Rumble and his company guilty on two charges each, and not guilty on seven charges each. The Commission has appealed the not guilty decisions.

The Commission is currently investigating BellSouth's prepaid cellphone promotion. It has not yet formed an opinion if BellSouth did or did not breach the Act.

"Our monitoring of advertising shows there is a major problem with cellphone promotions," Dr Bollard said. "The real costs to customers are often considerably more than those advertised and special conditions can make contracts much less attractive than they appear in promotions."

The Commission is tackling the problem with a mix of enforcement and education. Investigations and, where appropriate, prosecutions will continue and in addition much effort will be put into educating the industry.

The Commission will meet network operators Telecom and BellSouth and trade associations to ensure that they understand the requirements of the Act and to encourage voluntary compliance.

This will be followed with seminars for cellphone dealers.

"The poor level of compliance in this industry is disturbing," Dr Bollard said. "We are not dealing with new legislation. The Fair Trading Act has been law for more than 10 years. Some people have clearly not done their homework.

"Our objective is compliance with the Act. Where education is not enough to achieve that, we will take enforcement action."

Four cellphone retailers have previously been successfully prosecuted by the Commission. They are Cellular Systems Limited, Cellphone Warehouse Limited, Pacific Telephones Limited which trades as Cellular One, and Ben Rumble Communications Limited. Mr Rumble was also convicted as an individual. A fifth company, Hart Candy Communications Limited, has given the Commission signed undertakings that it breached the Act and agreeing to amend all its advertising and promotional material.

Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site http://www.comcom.govt.nz