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Freedom Communications fined $8,000

Freedom Communications fined $8,000: cellphone calls advertised at 5 cents a minute cost 99 cents a minute

The Auckland District Court today fined Freedom Communications Limited $8,000 for breaching the Fair Trading Act by advertising cellphone calls at 5 cents a minute but charging 99 cents a minute.

Commerce Commission Chair John Belgrave said that most consumers will have not know that they were overcharged because Freedom sold pre-paid cellphone cards.

Mr Belgrave advised consumers who used Freedom cellphone cards between January 1 and 12 this year, at between 7pm and midnight, to contact the company to have their accounts credited.

Mr Belgrave said that this case was warning to all consumers that use pre-paid cards for cellphones, telephones or Internet services and to the companies that provide pre-paid cards.

"Pre-paid cards can give consumers great convenience, but they require consumers to put a lot of trust in the companies. Consumers receive no bills when they use prepaid cards. They cannot easily check what they are charged and must rely on the companies to charge what was offered.

"It is the companies' responsibility to ensure that they are providing what they claimed they would. If the companies do not, then they risk breaching the Act."

In this case, the company that linked Freedom's services to Telecom's network, Telemedia Networks International Limited, told Freedom on October 31 last year that any work needed before Christmas had to be done soon.

On December 21 Freedom requested Telemedia to do the work needed to reduce Freedom's 7pm to midnight calling rate from 99 cents a minute to five cents a minute, effective from January 1 this year.

On December 24 Telemedia advised Freedom that the work could not be done in time.

Freedom had already booked radio advertising offering the 5c cents a minute rate. The advertising was to start in Auckland, Hamilton, Wellington and Christchurch on January 1. The radio stations required 24 hours notice to cancel the advertisments.

Freedom did not contact the radio stations and ran the advertisements knowing that consumers would be charged 20 times more than the offered rate.

Freedom's advertising stopped on January 13 and the reduced rate was never available.

Background

The Fair Trading Act prohibits false or misleading claims about prices (section 13(g)) and also prohibits any person advertising goods or services when they do not have reasonable grounds to believe that they can supply the goods or services at the advertised price (section 19(1)(b)).


Commission media releases can be viewed on its web site www.comcom.govt.nz


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