New guidelines for prepaid phone card industry

The Commerce Commission has issued new guidelines for the prepaid phone card industry following customer complaints that some cards did not deliver the number of calling minutes advertised.
The guidelines are designed to give prepaid phone card companies a better understanding of how the Fair Trading Act applies to advertising their goods. 

Commerce Commission Competition manager Stuart Wallace said the Commission’s greatest concern was unrealistic headline rates on advertising material. 

“Consumers should not have to carry out a mathematical exercise to work out which card offers the best rate,” Mr Wallace said. 

“If companies use fine print to disclose fees and conditions that materially affect the headline rate, they are likely to breach the Fair Trading Act,” he said.

He cited an example where a customer bought a $10 phone card and made one call to the UK, which left a credit balance of $9.38. The following month the customer was unable to make any further calls as there was no credit left on the card. According to the phone card company, the credit balance had reduced due to a daily fee of 20 cents + GST, which applied after making the first call. The customer had not seen this fee on the advertising materials. 

The phone card company was convicted and fined $140,000 for this and similar advertising.

The Commission’s new guidelines cover a range of Fair Trading Act obligations, and include a checklist for advertisements. The guidelines are available from the Commerce Commission’s website, www.comcom.govt.nz/prepaid-phone-card-industry-guidelines, and are being distributed to New Zealand based companies who market phone cards.

Background
Prepaid phone cards allow people to pay in advance for local or international phone calls and are readily available from retail outlets including dairies and supermarkets, as well as online.

The Commerce Commission successfully prosecuted two phone card companies for misleading consumers about the cost of using their prepaid phone card in late 2011.