Court Ruling Over Mobile Miss-Selling

New Zealand's Court of Appeal has found that Telecom Mobile "seriously misled customers" in door-to-door and telemarketing campaigns that promoted services that connected customers to Telecom New Zealand's CDMA network. The Court today ordered the company to contact customers who responded to the campaigns, and undertake corrective advertising.

Telecom Mobile undertook the marketing campaigns in 2001 and 2002, targeting the customers of a rival network and encouraging them to switch their mobile use to Telecom 027.

As a result of initial contact over the phone or at the door, a mobile phone was couriered to customers in a sealed box. Once the box was opened, the customer was deemed to have accepted Telecom Mobile's terms and conditions for a two-year contract. Over 14,000 phones were sent out.

The Court of Appeal upheld the High Court's finding that in both campaigns Telecom Mobile had breached the Fair Trading Act by failing to inform customers of their rights under the Door to Door Sales Act. Under the Door to Door Sales Act, customers have a seven-day cooling off period, within which they can change their mind without penalty. The Act requires that this be made clear to customers.

A decision in the High Court in 2004 found that Telecom Mobile had breached the Fair Trading Act by not informing customers of the Door to Door Sales Act rights, but stopped short of ordering the corrective advertising sought by the Commission.

Both the Commerce Commission and Telecom Mobile appealed, Telecom Mobile arguing the Door to Door Sales Act did not apply to its telemarketing campaign, and the Commission seeking corrective advertising to inform customers they may be entitled to money back.

The Court dismissed Telecom Mobile's appeal, describing their argument as "too convoluted to be credible."

The Commission's appeal was allowed, and corrective advertising ordered. The Court suggested Telecom Mobile's advertisements should acknowledge the Door to Door Sales Act had applied, and tell customers that the contracts were unenforceable, and that money paid could be refunded."

Posted to the site on 26th August 2005