Spark Warned By Commission, Refunds Thousands Of Broadband Customers Following Misleading Conduct

Spark New Zealand has been warned by the Commerce Commission and has refunded nearly 113,000 customers after some were charged for a wire maintenance service they did not need (or could not use or benefit from).

The Commission began investigating Spark New Zealand Trading Limited (Spark) in 2020 following a consumer complaint. Spark has provided the Commission with enforceable undertakings in which it committed to refunding all affected customers. Spark has already refunded around $15 million to customers with a remaining $348,757.93 still to be refunded to 4,921 customers.

Between 2014 and early 2021, Spark charged more than 400 wireless broadband customers and around 112,600 fibre connection customers for the wire maintenance service, even though most would have no need for it. Spark collected around $15.7 million in fees for the service from those customers over the six-year period.

Commission Chair, Anna Rawlings, says Spark’s conduct, which likely breached the Fair Trading Act, created an impression through its website that a wire maintenance service was suitable for all connection types when it was not, and made misleading representations through invoicing its customers for the service that would be of no use or benefit. This highlights the need for businesses to have the right systems and processes in place, so customers are charged only for the services they need, can use, or benefit from.

“Customers must be able to rely on information businesses provide to them when they are buying, contracting or being invoiced for services,” says Ms Rawlings.

“Businesses should not be charging customers for services that they don’t need or have no use for, or services that they cannot practically benefit from. If extra services or costs are charged, businesses must ensure that information about them is clearly disclosed to customers and is accurate, complete and easy to understand.”

Spark has since stopped selling the service to wireless and fibre connection customers. It is in the process of voluntarily refunding all wire maintenance service fees paid by customers with wireless and fibre broadband connections and is putting system fixes and processes in place to prevent the wire maintenance service being offered to these customers in the future.

More information can be found on the Commission’s case register here.

Refunds
Where affected customers are still Spark customers, refunds have been applied as credit to their Spark accounts and may have already been used automatically – i.e. applied towards invoices for other Spark services.

Where affected customers are no longer customers of Spark, refunds can be paid to a nominated bank account, donated or transferred to another customer’s Spark account.

Spark is making efforts to contact former customers about their refunds. However, customers who previously had wireless or fibre broadband accounts with Spark and think that they might have been charged for the wire maintenance service should consult the Spark website to find out if they are entitled to refunds. More information for former Spark customers on claiming refunds is available on Spark’s website.

As at July 2022, almost 4,921 former customers are still to claim their refunds, with 1,223 former customers each eligible to receive over $100 of refunds.

Telecommunications Act
The marketing of telecommunications services is covered by general consumer protection law, including the Fair Trading Act 1986 and the Consumer Guarantees Act 1993. Telecommunications providers are expected to comply in all respects with their obligations under those laws.

In addition to the Commission’s enforcement powers under the Fair Trading Act, the Commission also has powers under Part 7 of the Telecommunications Act 2001 to focus on consumer matters in the telecommunications industry and, in particular, retail service quality. This includes customer service, fault management, product disclosure, billing and switching.

The Commission has identified some key areas of concern for consumers, and are working with consumers and the industry to improve service quality using our Part 7 powers.

Background
Wire Maintenance Service
The Wire Maintenance Service is a service that covers the cost of maintenance callouts for common faults to consumers’ on-premises telecommunications wiring, splitters and jack points.

Customers are responsible for the maintenance of all wiring and equipment after the demarcation points to the individual jack points within their premises, including internal wiring. Network providers are responsible for the maintenance of any wiring or equipment faults before demarcation points.

For copper-based connections, the demarcation points are usually outside of buildings. The wire maintenance service may therefore be of some use to customers with copper-based connections. However, for most fibre connection customers, there is no internal wiring to maintain between the demarcation point and the modem. For wireless connections, there is no internal wiring – meaning the service has no applicability for these customers.

For many years, customers were automatically charged $4.95 per month for the service, unless they chose to opt out of it. In November 2018, Spark changed the service to an opt-in service following a wider discussion with the Commission on various compliance issues.

As new technology was rolled out, Spark continued to offer and supply the service including to fibre and wireless broadband connection customers who might have no need, no use, or receive no benefit from it. Spark did not have processes in place to identify and record the details of customers who might need, receive benefit from or have use for the wire maintenance service.

A warning letter
A warning explains the Commission’s view of the conduct and does not constitute a finding of non-compliance with the Fair Trading Act. Only the courts can decide whether a breach of the law has occurred.

The purpose of a warning letter is to inform the recipient of the Commission’s view that there has likely been a breach of the law, to suggest a change in the recipient’s behaviour and to encourage future compliance with the law.

Court enforceable undertakings
Court enforceable undertakings contain commitments from a person or business, which may include to stop doing something, make compensation payments, publish corrective advertising or pay costs to the Commission. If the party does not comply with their undertakings, then the Commission may apply to the Court to enforce the undertakings.

The court enforceable undertakings accepted by the Commission in this case set out Spark’s approach to contacting current and former customers and providing credits which can also be paid out as refunds.

Similar cases

• Ocean Contracting Limited was fined $75,000 for making false or misleading representations that their heat pumps needed refrigerant gas top-up to function, when they did not.
• Air New Zealand Limited was warned after it sold travel insurance on an opt out basis with insufficient disclosure of the ability to opt out.
• TV Shop was fined for failing to comply with the extended warranty disclosure requirements, and selling 18,190 extended warranties to customers.
• Vodafone New Zealand was fined $350,000 for making false representations in invoices it sent to customers.

Spark’s previous dealings with the Commission

Spark has been investigated a number of times for potential breaches of the Fair Trading Act.

In 2019 it was prosecuted and fined $675,000 for making false or misleading representations in its customer invoicing and when making a $100 credit offer to new customers.

It was also warned three times in that same year for misleading in-contract customers about a broadband price increase, making unsubstantiated representations about the speeds consumers would receive from portable Wi-Fi devices and false representations about the price of sim cards, and failing to correctly apply a $300 welcome credit to the accounts of eligible customers.

In September 2018, the Commission engaged with Spark to discuss various compliance issues after the retail telecommunications industry became an organisation-wide priority for the Commission in 2017/2018 year. One of the issues discussed was the Commission’s concern around the sale of services where customers need to opt-out. Following the discussion, Spark changed the wire maintenance service from an opt-out service to an opt-in service.

In 2017, the Commission sent a warning to Spark for misleading customers and for making unsubstantiated representations about a competitor’s network closing imminently in an advertising campaign.

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