Not so "free" internet service costs Clear $15,000

Media Release

Issued 9 November 2001/110

Not so "free" internet service costs Clear Communications $15,000

Claims that were liable to mislead consumers over its "free" internet service have cost Clear Communications $15,000 in the North Shore District Court.

Clear pleaded guilty to five charges of breaching section 11 of the Fair Trading Act over its national advertising campaign for its internet service called ZFree.

In nationwide television and newspaper advertising, Clear offered a free internet service to the public. However, the advertising failed to disclose that consumers in some areas of New Zealand would be required to make toll calls to connect to Clear's internet service provider. In addition, consumers who were not required to make toll calls were liable to pay Telecom's 0867 charge of two cents per minute, after 10 hours use per month.

Consumers who were required to make a toll call or pay the 0867 charge were therefore liable to be misled over the offer of a free internet service.

Different versions of the advertising used phrases such as "Kids, don't ask your parents first. After all, ZFree costs nothing" or "Great gift idea. Give your loved ones free internet access.

Commission Chair John Belgrave said that the emphasis in all of the advertising was that the ZFree service was free, and the Commission's concern centred on two particular areas.

"Firstly, consumers were liable to be induced into believing there was no extra cost to connect to the internet using the ZFree service," said Mr Belgrave. "Secondly, the extensive advertising was liable to impede a consumers ability to accurately compare Clear's offer with those of competing service providers.

"The Act is designed to provide consumers with information that is not misleading so that they can make informed decisions.

"It is also designed to create an environment that allows fair competition to exist between retailers so that they are all competing on the same basis."

Background

The advertisements did not mention that a reader or viewer who lived outside a local free calling area where Clear had a "point of presence" would incur a toll call charge each time they accessed the internet through the ZFree service.

Nor was there any mention that a customer who took Clear's service and who lived in a local calling area where Clear had a "point of presence" would incur an 0867 charge of two cents a minute for all internet use over 10 hours each month.

At the time of the investigation, Clear had what it describes as "points of presence" in 12 towns or cities in New Zealand. The 12 local calling areas defined as "points of presence" were Christchurch, Dunedin, Wellington, Masterton, Palmerston North, New Plymouth, Napier, Rotorua, Tauranga, Hamilton, Auckland and Whangarei.

ENDS

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