Commission releases report on unfair contract terms

Commission releases report on unfair contract terms in the telco sector

The Commerce Commission has today released a report detailing the findings of its review of standard form consumer contracts in the telecommunications sector. The review was completed to assess the sector’s compliance with the unfair contract terms provisions of the Fair Trading Act introduced in March 2015.

The unfair contract term provisions are designed to protect consumers from contract terms that create a significant imbalance of rights or obligations between the company and the consumer.

After the new provisions were introduced the Commission launched a project to review a range of standard form consumer contracts for unfair terms. Commissioner, Anna Rawlings said the telecommunications sector was chosen as its first focus for two reasons. “Overseas regulators told us in their experience it was an industry in which potentially unfair terms were common. In addition, many of the past complaints we had received about unfair contract terms related to telecommunications contracts.”

As part of the project 19 separate standard form contracts from 7 different companies were reviewed.

“The majority of telco companies had made real efforts to comply with the provisions before they were introduced. However, we did identify 66 terms that we considered potentially unfair. Many of the terms were common across the contracts, particularly those that limited the liability of the company, allowed the company to unilaterally vary the contract or made the customer responsible for unauthorised charges,” Ms Rawlings said.

In some instances the companies were able to provide information to the Commission to show that the term was necessary to protect the legitimate business interests of the company. In all other cases, the companies accepted the Commission view and have amended or agreed to amend the terms concerned.

“This is a great outcome for New Zealand consumers. Most New Zealanders have one or more standard form consumer contracts with a telecommunications company and they can now be more confident about the fairness of those contracts. We were pleased that the telco companies were receptive to our concerns, amending or agreeing to amend the majority of terms, avoiding the need for the Commission to consider court action,” Ms Rawlings said.

All companies have been issued with compliance advice letters from the Commission reminding them of their obligations under the law and cautioning them to ensure their standard form contracts remain compliant with the law.

The Commission has also focussed on contracts in the electricity retail, credit and gym sectors and expects to report on these industries later this year.

The full report on the telco sector contracts can be found on the Commission’s website.

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