Mercury Fined For Misleading Its Customers Over Early Termination Fee

One of New Zealand’s largest electricity retailers, Mercury NZ Limited (Mercury), has been fined $279,500 for communicating to approximately 2,000 customers that they were required to pay an early termination fee when they were not, breaching the Fair Trading Act.

Commerce Commission’s General Manager of Fair Trading, Kirsten Mannix says the Commission expects that all businesses, no matter their size, have robust processes and systems in place.

“It’s vital that staff are trained properly and told about any system changes or failures to ensure that consumers are only told correct information and are not misled.”

Changes to Mercury’s terms and conditions in 2016 meant that customers cancelling an automatically renewed fixed term plan would no longer be required to pay an early termination fee. However, between 2017 and 2020 Mercury communicated to some residential customers, who were cancelling auto-renewed contracts, that they were required to pay the fee. Some customers were also told that the fee would be waived if they remained a Mercury customer.

“Our investigation identified problems within Mercury’s billing systems, resulting in representations that misled a number of customers,” Ms Mannix says.

Mercury issued invoices to approximately 2,000 customers that incorrectly included the early termination fee, and on occasion made the misrepresentations via email or over the phone.

In a reserved decision released by the Auckland District Court on 2 May 2023, Judge Lance said the representations were a material departure from the truth that endured for a reasonably lengthy period.

“[…] retail electricity services are an essential consumer good for all households. It can be a significant ongoing expense. Accordingly, traders who supply essential services do have a responsibility to ensure that representations to consumers […] are not misleading.”

Ms Mannix says that businesses must ensure they give consumers an accurate picture of their rights – whether that is in writing, or over the phone – and consumers should not be asked to pay for something where a payment is not due.

“Not only can misrepresentations like these cause stress and harm to consumers, electricity retail is an essential service, and the ability of consumers to switch providers in line with the contracts is vital to maintain a competitive market.”

Mercury has refunded almost all customers who were incorrectly charged and paid an early termination fee. If consumers think they have been incorrectly charged an early termination fee, they are encouraged to reach out to their provider.

A copy of the Judge’s sentencing notes will be made available on the Commission’s case register shortly.

Background
Mercury is one of New Zealand’s largest electricity retailers. The company is listed on the New Zealand Stock Exchange and the Australian Stock Exchange, with the New Zealand Government (the Crown) holding a legislated 51%.

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