New Zealand cracks down on phone card industry

New Zealand's Commerce Commission issued new guidelines for companies operating in the country's prepaid phone card market. The guidelines, which address the disclosure practices of phone card providers, were promulgated after the commission received complaints from phone card users that they were not receiving the number of call minutes advertised. The commission said providers that do not follow the guidelines will be in violation of New Zealand's Fair Trading Act.

"Consumers should not have to carry out a mathematical exercise to work out which card offers the best rate," said Stuart Wallace, Manager of the Commerce Commission, in mid December 2012. "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."

The commission cited one instance of a company convicted and fined $140,000 in late 2011 for draining phone cards of value after users made initial phone calls with the cards. The guidelines involve best practices for how phone card providers should disclose rates and fees. The commission said a per-minute headline rate should be an all-inclusive price, but if the rate is expressed as the total number of minutes, it should not be eroded by additional fees and charges.

"While an all-inclusive price is preferable, you can still avoid making false or misleading representations by including any important additional information, such as additional fees or conditions of use, in the headline rate statement," the commission said in the guidelines. "Obviously, for space and readability reasons, this should be limited to one or two additional fees or conditions only."

The commission noted that the guidelines are general principles to provide phone card companies "an indication of factors that are likely to trigger a Commission investigation." The guidelines can be accessed at www.comcom.govt.nz/prepaid-phone-card-industry-guidelines/ .

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