Xtra fined for false claims of endorsement

Xtra fined for false claims of endorsement by Commerce Commission

Xtra Ltd, a division of Telecom New Zealand Ltd, has been found guilty of breaching the Fair Trading Act and has been fined $45,000 in the Wellington District Court today. Xtra must also pay $10,000 in costs.

Xtra was convicted on three charges of misrepresenting to complainants that its pricing, conditions attached to its services or its billing systems had been approved by the Commerce Commission. These were in situations where consumers were challenging the validity of Xtra's charges or conditions. The complaints were laid with the Commission from September 2005 to November 2006.

Xtra had told one customer that the Commerce Commission had tested Xtra's billing systems. Another was told that she could not access her Xtra internet account from another internet service provider's connection because of a decision by the 'Telecommunications Commission'.

A third customer was told that Xtra's pricing was in line with Commerce Commission guidelines. The Court found that all of these statements were false.

"This case serves as a reminder to all businesses that they cannot claim endorsement or approval that they do not have," said Stuart Wallace, Commerce Commission's Fair Trading Manager, Christchurch.

In February 2005, the Commission had warned Telecom for similar conduct. As part of the warning, Telecom had been told it needed to ensure that its staff were fully aware of the consequences of claiming any actual, or implied, approval by the Commission. Telecom was warned that any such claims in the future could result in more serious enforcement action. The Court found that Telecom had taken no effective action to avoid further similar breaches after receiving the Commission's initial warning.

The Court's judgment confirms that businesses should take particular care in providing adequate training to their staff to lessen the likelihood of misleading information being given to consumers. Judge Broadmore noted that Telecom's training programme at the time of the offences had fallen a long way short of what was reasonable given the high relevance of the Fair Trading Act to Telecom, the company's previous history with the Commerce Commission and the Commission's specific warning. He also noted that Xtra's call centre deals with a high volume of calls and that Telecom has since put in place more comprehensive training material for their customer service representatives.

"Businesses need to ensure that training, policies and procedures are in place so that their staff are always giving consumers accurate information," said Mr Wallace. "Consumers rely on accurate information in order to be able to make informed decisions. Misleading information can also harm other businesses who are complying with the law."

Background

Section 13 of the Fair Trading Act states:

No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,:

(e) make a false or misleading representation that goods or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or

(g) make a false or misleading representation with respect to the price of any goods or services; or

(i) make a false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right or remedy.

Only the courts can decide if the Act has been breached. Companies found guilty of breaching provisions of the Act may be fined up to $200,000 and individuals up to $60,000.

The judgment is available on the Commission's website www.comcom.govt.nz under Media Centre/Recent judgments

ENDS

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