Significant penalties are being used by the Courts to ensure businesses both correctly market their goods and services and maintain adequate processes and systems to ensure that promises to customers are carried out. In this article, we discuss recent cases and key learnings to help family businesses comply with consumer protection laws.
Record $3.675m fine for One NZ for breaching Fair Trading Act
In August 2023, the High Court imposed a record fine of $3.675 million on One NZ, for misleading consumers in the marketing of its FibreX broadband service. The fine was the highest ever awarded under the Fair Trading Act (FTA).
One NZ was found guilty in 2021 for misleading consumers into believing its FibreX service was fibre-to-the-home broadband when it was not. It was also found guilty of falsely suggesting to consumers that FibreX was the only broadband service available at their address, which was also untrue.
Customers Refunded Over $470,000 of early termination fees
A Commerce Commission investigation and subsequent High Court proceedings have resulted in more than 2,600 customers of Vocus Group companies being refunded a total of nearly $480,000 of early termination fees after breaches of the FTA. The companies entered into fixed-term agreements via uninvited direct sales. Uninvited direct sales are sales that are made door-to-door or over the telephone and are instigated by the business rather than at the request of the customer.
Vocus Group failed to adequately disclose early termination fees payable by customers. The Court found these fees to be part of the total price payable and other consideration that is required to be disclosed to customers, and that Vocus Group breached the FTA.
Record $3.9m penalty for Vero’s misleading representations
Vero received a massive fine of $3.9 million for making misleading representations about multi-policy discounts affecting approximately 42,000 customers.
Vero acknowledged that they breached the Financial Markets Conduct Act 2013 (FMCA), by failing to provide certain customers with agreed multi-policy discounts. The Financial Markets Authority found that the breach was fundamentally caused by errors and deficiencies with Vero's systems and some data input errors. Vero effectively overcharged customers approximately $9.9 million. Vero compensated the affected customers and donated further sums to charitable organisations where affected customers could not be contacted.
Kiwibank’s guilty of misleading customers about transaction fees
Kiwibank was also fined $812,500 under the FMCA for providing misleading information to its customers about transaction fees over almost 15 years.
Kiwibank’s general terms and conditions stated that there would be no transaction fees payable on accounts for customers if they also had a Kiwibank home loan. However, Kiwibank failed to waive account fees for about 35,000 home loan customers who were collectively overcharged around $1.17 million.
Learnings
Some of the learnings that can be taken from recent cases include:
- Regulators and the Courts are focused on deterrence. Penalties are being used by the Courts to ensure businesses maintain adequate processes and systems.
- Substantiate your marketing claims before making them. If you make a claim about a good or service, you must have reasonable grounds for believing the claim is true at the time you make it. Any claim should be supported by facts, figures and credible sources of information. Claims made on the back of guesses or unsupported opinions will not comply.
- Make sure that your systems and processes are capable of delivering on your claims. Ensure that your systems are fit for purpose, reliable and can deliver on your claims.
- Train your staff. To ensure you deliver on your marketing claims you should train your customer-facing staff and relevant administrative staff to ensure you correctly market and sell your goods and services, and you correctly enter data into your systems.
- Check for issues and escalate: Regularly check your systems and processes for issues and deal with any identified issues. Ensure issues are escalated internally to make sure that they are dealt with.
With heightened scrutiny on all businesses, now is a good time for family businesses to check and improve their compliance processes and systems to ensure they comply with all relevant laws.
Disclaimer: This information is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
All rights reserved © Jackson Russell 2023
Disclaimer
The views expressed in this content are those of the author, who is also responsible for any errors and omissions. Family Business Association provides this article for your information only. The content of the article should not be taken as advice. If you wish to explore this topic, please consult an advisor who you consider to have the expertise to provide specific advice in relation to your family business.
