Misleading promotion costs company $9,000

Media Release

Issued 18 April

Misleading promotion costs marketing company $9,000

Misleading electricity customers about the chance to win free power if they took out ‘PowerPLUS’ power insurance has cost marketing company David Barrowclough Direct Limited $9,000.

David Barrowclough Direct pleaded guilty to five charges of breaching the Fair Trading Act in the Auckland District Court last week.

The Commerce Commission has laid similar charges against Royal Sun Alliance Insurance (New Zealand) Limited, Bay of Plenty Electricity Limited, as well as King Country Energy and Todd Energy Limited, both trading as FreshStart Energy. The four companies are defending the charges.

David Barrowclough Direct promoted power insurance policies on behalf of the underwriters, Royal Sun Alliance, and the power companies over a period from February 2000 to December 2001. The offer of power insurance was made to commercial and residential account holders of the power companies by way of telemarketing and mail-out brochures.

The Commission alleged that during that time, a prize draw to win free power for customers who took up the insurance was promoted by the defendants when they had not agreed on draw dates or determined who would be responsible for making the draws and providing or paying for the prizes. Approximately 3,500 customers took up the offer.

Chair Paula Rebstock said that while a prize draw was eventually arranged by Royal Sun Alliance and Todd Energy and held in July 2002, it took place after the Commission had started its investigation and communicated with the defendants about its concerns.

In sentencing, Judge Morris said that she had no criticism of the insurance cover itself but there was “clear and considerable negligence” in failing to hold a draw in a timely fashion.

She commented that David Barrowclough Direct had a central role in arranging the scheme and that two and a half years between the launch of the scheme and the first draw was “too long”.

ENDS

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