More Commission action on website claims:Cogent Communications fined $7,000
Published14 Sep 2000
In the Commerce Commission's third website case in the last five weeks, Cogent Communications Limited, trading as Hart Candy, was fined $7,000 in the Auckland District Court for breaching the Fair Trading Act by making misleading claims about cellphones.
"Businesses must understand that the Act applies to claims made on websites, in e-mail and to e-commerce in general, in the same ways that it applies to other media," Commission Chair John Belgrave said.
"This has been our view for some time and we are now taking court actions to get legal precedents to support and develop that view," Mr Belgrave said.
In this case, Cogent's website did not disclose compulsory additional costs and conditions for Telecom "Go Prepaid" cellphone packages. The additional costs and conditions were displayed in-store.
Courts have previously ruled that the law is broken when false or misleading claims are made providing further information after consumers have been enticed into a store does not excuse the advertising.
"Courts have now extended those precedents to also apply to claims made on websites," Mr Belgrave said.
The charge relates to advertising on the website from November 22 last year to January 5 this year. During that time Cogent sold 319 "Go Prepaid" packs.
The Commission's prosecution came after it followed up a previous settlement with the company and found that it had not been honoured.
"There is a second message here," Mr Belgrave said. "We follow up all settlements and if they are not honoured, then will look at what further action to take."
Hart Candy Communications Limited, as the company was then called, gave signed undertakings to amend all its advertising and promotional material for cellphones to ensure that all conditions and costs are clearly shown.
At the time of the website advertising, consumers using "Go Prepaid" cellphones had to buy at least an additional $20 of airtime every 60 days or lose their remaining airtime credits. In addition, if more airtime was not bought for six months, then the cellphone was disconnected.
Neither the additional cost of buying more airtime nor the disconnection condition were disclosed on Cogent's website.
