On 27 November 1998 Rushton DCJ ruled that Bell South New Zealand was not in breach of the Fair Trading Act.
Rushton DCJ also said of this media release that it contained "highly inflammatory and calculatingly damaging material complete with inaccuracies in breach of its own guidelines, a media release which is extraordinary coming from a body tasked to ensure that those in Trade present a fair and accurate picture to the public."
The media release remains on the Commission's Web site only as it is part of the complete historical record of media statements made by the Commission.
The Commerce Commission announced today that it will prosecute BellSouth for making allegedly misleading claims in its "Prepay" cellphone promotions.
Commission Chairman Dr Alan Bollard said that until yesterday the Commission was under the impression that BellSouth was prepared to work towards a settlement and resolve the issue for its customers immediately.
However, BellSouth has refused to publish corrective advertising acceptable to the Commission, and the Commission will take court action against it alleging breaches of the Fair Trading Act.
After being specifically advised that what it described as "corrective advertising" was unacceptable, BellSouth has run the advertisements anyway. These advertisements do not properly correct the misleading effects of previous promotions.
"I am sorry to say that BellSouth's view of what corrective advertising should be, was totally unacceptable, and court action will be filed as soon as possible," Dr Bollard said.
"BellSouth has told the Commission that we do not understand how good a deal 'Prepay' is for customers. If it is such a good deal, then why did BellSouth not tell customers all about it?
"Instead, BellSouth launched a nation-wide promotional campaign that was, in the Commission's view, grossly inaccurate and misleading.
"Its response to the Commission's concerns has been woefully inadequate. BellSouth's new advertisements are no more than further 'Prepay' promotions and do not answer our concerns in an adequate way.
"The Commission is extremely disappointed by BellSouth's approach to dealing with us over a possible settlement. We would have preferred to settle this matter but BellSouth's unilateral actions and insistence on hiding corrections of past misleading promotions inside advertisements prevented this."
"Prepay" customers paid $299 for a cellphone and bought phone cards to use with it. BellSouth misleadingly promoted "Prepay" cellphones as similar to pay phones using phone cards. The promotion misleadingly stated that there were no commitments, no contracts, no monthly bills and "no hassles".
"All these claims were incorrect," Dr Bollard said. "There was a contract in the form of a connection agreement, with terms and conditions involving expiry dates, minimum air time purchase requirements, and disconnection and loss of number six months after the last air-time purchase.
"To cap it all off, the conditions were contained in a booklet which was sealed inside the package in which the phone was bought. Customers could not open it until after they had bought the phone.
"This was anything but a 'no hassles' offer."
The Commission is warning consumers considering buying a "Prepay" cellphone to ensure that they are aware of all the terms and conditions before buying.
The Commission's concerns about the promotion included:
· BellSouth did not initially disclose that there is a 60 day expiry period for "Prepay" cards and all unused call-time credits are lost if the card is not recharged.
· BellSouth did not initially disclose that if a customer did not make calls on their "Prepay' cellphone for four months after their last card expired, then the cellphone is disconnected and the number may be allocated to another customer. There is a $99 re-activation fee, but no guarantee that the same number will be re-activated.
· Despite "Prepay" cellphones being promoted as similar to pay phones, there are substantial conditions attached to the cellphones.
· Despite the claims that there are "no term contracts", "no monthly bills" and "no commitments", there is a connection agreement that imposes obligations and responsibilities, including a requirement to buy at least one $20 card every 60 days.
· The conditions are in a booklet sealed inside the package in which the cellphone is bought. The booklet cannot be opened until after the cellphone is bought.
· The initial failure of BellSouth sales staff and authorised dealers to disclose the terms and conditions of use of "Prepay" cellphones without first being prompted by customers.
· The failure of BellSouth's direct mail campaign to disclose the terms and conditions of use of "Prepay" cellphones.
Although some changes have been made to BellSouth's advertising since the launch of the "Prepay" campaign, these have been inadequate in the Commission's view to redress the misleading representations which it considers were made in the initial launch advertising 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 www.comcom.govt.nz
