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Telecom Mobile pleads guilty Fair Trading breaches

Media Release

Issued 20 October 2003-04/053

Telecom Mobile pleads guilty to Fair Trading breaches

Telecom Mobile Limited was fined $10,000 plus costs in the Wellington District Court today after pleading guilty to two charges of breaching the Fair Trading Act. The charges, brought by the Commerce Commission, related to nationwide advertising campaigns in late 2001 aimed at inducing both existing 025 and rival customers to switch to the 027 network.

The first charge involved advertising that represented ‘$149 Kyocera 3035 (on 027) on a 24 month Anytime call plan. Or just $99 if you are already a Telecom customer on a monthly plan’.

Commission Acting Chair Paula Rebstock said that this claim was liable to mislead existing Telecom customers because only those customers who were already on an Anytime call plan or whose existing contracts had expired were able to take up the offer at the advertised price.

“The undisclosed conditions significantly increased the actual price payable to switch. Customers who were in the middle of a contract had to pay a disconnection fee to end any existing contracted plan and change to the Anytime call plan. Furthermore, the Anytime plan is designed for value where most calls are made during business hours and would have been markedly more expensive for non-business customers,” she said.

The second charge involved advertising to business customers that represented ‘Upgrade your business to 027 for FREE – get a free Kyocera when you bring us your 021 or 029 mobile … 50% off your peak rate calls*’.

The asterisk referred to small print which stated ‘Telecom Talk Time applies after free minutes are used’. The fact that Talk Time applies only to Telecom mobile calls to other Telecom mobile phones, and not to land line or competitors’ mobile phones was not stated in the advertisement.

“Given the restrictive nature of calls eligible for the 50% discount, this advertisement was misleading as to the extent of the benefits available,” Ms Rebstock said.

In sentencing, Judge Tuohy gave weight to the substantial degree of dissemination of the advertising and the need to deter both Telecom Mobile and businesses in general from similar offending. He noted that Telecom Mobile’s guilty plea and the fact that this was its first conviction were mitigating factors in setting the level of fine.

ENDS

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

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