Court injunction against Discount Premium Holidays
Issued 28 November, 2007/ No 69
Court injunction granted against Discount Premium Holidays
A group of companies that has been telemarketing discount travel memberships and vouchers has been ordered to stop breaching the Fair Trading Act, as a result of an injunction sought by the Commerce Commission.
The injunction was granted in the Auckland High Court on 16 November against a New Zealand company, Discount Premium Holidays Ltd, its affiliated Australian companies, Key 2 Communications Pty Ltd, 24 x 7 Direct Pty Ltd, and the director of all three companies, Mr Devang Parikh.
Telemarketers calling on behalf of "Discount Premium Holidays" offered discount accommodation vouchers and memberships, which a Commerce Commission investigation has revealed are extremely difficult for consumers to redeem at New Zealand accommodation providers, rendering them effectively worthless.
The memberships cost between $109 AUD and $209 AUD, and have been actively sold in the New Zealand market to consumers "cold-called" by telemarketers based in Melbourne. Approximately 2800 memberships have been sold in New Zealand since July 2006.
The investigation revealed that the telemarketers made the following misleading representations:
i. Misrepresenting the nature, pricing and terms of the product.
ii. Misrepresenting Discount Premium Holidays' affiliation with accommodation providers, credit card issuing banks and travel voucher suppliers.
iii. Misrepresentations as to the endorsements and capability of the company in promotional material provided to New Zealand accommodation providers.
In most cases, consumers were told that the vouchers were redeemable at a large number of accommodation providers in New Zealand and worldwide. In fact, it was unlikely that the vouchers could be redeemed at accommodation providers in NZ or elsewhere, as DPH had no authority to market the vouchers from the suppliers. Consumers were also told that they had won free accommodation, when in fact the vouchers had onerous conditions attached before the consumers would be able to redeem them.
The Commerce Commission Chair Paula Rebstock says the breaches identified in the investigation are at the serious end of the scale. "Telemarketers can be very persuasive, but when they are persuasive as well as misleading consumers are often caught out in deals that are not at all what they should be."
"Purchasing a voucher in this manner should not be an act of faith. Consumers should be able to believe that what they have purchased is going to be accepted at the businesses promoted by the telemarketer, and it is worth the value purported," says Ms Rebstock.
In addition to granting the injunction, the court has made orders under section 42 of the Fair Trading Act requiring DPH to disclose certain information when telemarketing to New Zealand consumers. This is the first time such orders have been made in an interim injunction proceeding.
The case also set new precedent regarding the application of the Fair Trading Act to parties not resident in New Zealand, but engaging in conduct in breach of the Act here. Three of the four defendants were resident in Australia. Cooper J held that telephone calls into New Zealand constitute conduct in New Zealand, therefore the New Zealand Courts have jurisdiction over the Australian parties in the case.
The Commission also intends to file criminal proceedings against all the parties, with applications for orders for refunds to aggrieved consumers under s43 of the Act.
The Commerce Commission is interested in hearing from any consumers who have received telemarketing calls from Discount Premium Holidays, also now trading as Discount Premium Vouchers. Consumers who have been contacted by these companies since 19 November should call the Commission on 0800 943 600.
Definition of false and misleading under the Fair Trading Act The term "false" was considered in CC v A & W Hamilton Ltd (1989) 3 TCLR 398. Judge Bisphan noted at p 402 that "false" did not import any element of moral turpitude, but simply meant untrue, erroneous, or incorrect. This is consistent with the characterisation of the offence as one of strict liability.
In Given v C V Holland (Holdings) Pty Ltd (1977) ATPR 40-029; 15 ALR 439; 29 FLR 212, Franki J stated at p 17,386; p 443; p 217:
"if a representation is in fact not correct, it comes within the words of the section, even if it is not false to the knowledge of the person making the representation … There is nothing novel in equating 'false' with 'contrary to fact'."
As is the case with "false", the word "misleading" is not defined in the Act. The Concise Oxford Dictionary (8th ed) defines "misleading" as "causing to err or go astray".