Telecom admits breaching Fair Trading Act - pays back $9.5m to customers

Tuesday, January 12, 2010

In a settlement with the Commerce Commission, Telecom New Zealand Limited and Xtra Limited (Telecom) has admitted breaching the Fair Trading Act by misleading more than 130,000 broadband customers.

In 1999 Telecom introduced a broadband internet service. It offered its existing dial-up customers the opportunity to migrate to broadband, although these customers would continue to have a dial-up connection, but would not be charged. Telecom intended that no monthly account charge would apply for the dial-up connection and customers would only be charged for usage.

Between 1999 and 2006, due to a number of administrative errors, Telecom customers who took up the advertised offer continued to be billed monthly account charges for dial-up, resulting in an over-charge to these customers in excess of $9.5 million. This was caused by Telecom staff not following the correct steps when changing a customer from dial-up to broadband.

Telecom admitted it had breached the Fair Trading Act by sending customers invoices which contained a false representation as to the price those customers had to pay for internet services, by including the monthly account charges for dial-up.

From March 2007 Telecom began refunding more than 130,000 affected customers and writing to all those customers to advise them of the error.

“The net effect of Telecom’s error was substantial. A small oversight repeated many times has resulted in a huge level of refunds for customers. Customers trust that businesses will have the correct processes in place and that they will be charged the right price. Although we encourage consumers to check their monthly statement, businesses should get it right,” said Commerce Commission Fair Trading Auckland Manager Graham Gill .

“Telecom has cooperated with the Commission’s investigation and undertaken a costly internal exercise to proactively refund all affected customers. They have also agreed as part of this settlement to introduce procedures to prevent a repeat of this sort of failure,” said Mr Gill.

“Nonetheless the Commission is becoming increasingly concerned at the number of occasions on which Telecom has acted in breach of the Fair Trading Act. Since 2003 Telecom has been the subject of Fair Trading Act convictions, settlements or warnings on at least eight occasions. The Commission encourages Telecom to make compliance with the Act a top priority.”

Around 1400 affected customers have not been able to be traced by Telecom to receive their refunds, although the credit has been applied to their inactive account. Any customer who believes they may be entitled to a refund should contact Telecom.
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