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Telecom convicted for failure to disclose costs

Media release

Wednesday 23rd February 2005

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Failing to disclose a 12 cents per minute charge for calls made to an 08322 information line has cost Telecom New Zealand Limited more than $5,500 and a conviction under the Fair Trading Act.

The Commerce Commission took the action against Telecom following a complaint from a member of the public concerned that he had been charged unknowingly for a number of calls made to the Environment Canterbury (ECan) River and Flood information number in late 2001.

In the Christchurch District Court, Judge Abbott fined Telecom $4,000 for breaching the Act, and ordered Telecom to pay $1,500 to the Commission's costs, plus court costs of $130.

The Commission's investigation revealed that the standard Telecom message advising of charges for calling an information line had been missing from the line for the period in which the complainant had made his calls, and was not reinstated until January 2002 when ECan advised Telecom of the problem. Telecom was unable to establish how long the message had been missing from the information line, which had been operating since 1986.

Chair Paula Rebstock said that even in the short period between the time the complainant made his first call to the information line and the time the message was reinstated, approximately four months, over 10,000 calls were made to the information line.

The Court judgment found that Telecom had engaged in misleading conduct by failing to advise the public, in either the phone directory or at the start of the call itself that calls to the Ecan Infoline attracted a charge. In fact, the only way that consumers could have discovered that these calls were chargeable was to call Telecom's 123 customer service numbers.
"The Court decision reinforces the important principle that the Fair Trading Act imposes on traders a legal duty to advise consumers of any unexpected costs before they purchase goods or services," said Rebstock.

In an earlier judgment, the Court found Telecom guilty as "it did not provide any information in the telephone directory, either in the general information section or through Environment Canterbury's listings, regarding the chargeable nature of calls to 08322 Infoline calls and because, for some unexplained reason the introductory greeting "fell off" the Ecan Infoline number during part or all of the period from 20 October 2001 and 25 January 2002."

The Commission had previously offered to settle the matter with Telecom. The settlement offer had required an acknowledgement by Telecom that it had breached the Fair Trading Act and an agreement that it would compensate affected consumers, however the company chose not to accept the Commission's offer.

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