Mobile phone campaigns breached the Door to Door Sales Act and the Fair Trading Act

The High Court determined that a telephone company’s marketing campaign breached both the Door to Door Sales Act and the Fair Trading Act because customers were not adequately notified of their right to a “cooling off period” and, as a result of that breach, the campaign included “false or misleading conduct or misrepresentations”.

In this case1, a mobile phone company carried out a marketing campaign involving unsolicited telephone “cold calls”. Subject to a credit check, those who gave a positive response were sent a phone, together with the company’s standard terms. The terms included a contract term of 24 months, with cancellation only permitted on payment of early disconnection charges.

Door to Door Sales Act

The first question for the court was whether the Door to Door Sales Act 1967 (the Act) applied. The answer turned on the definition of “appropriate trade premises” because the Act only applies to agreements entered into at places other than “appropriate trade premises”. The company argued that the agreements were concluded over the phone and were therefore made at appropriate trade premises, namely the call centre.

The Court found that the wording of the company’s scripted sales pitch and instructions, the information contained in the courier package containing the mobile phone, a letter to the recipient, a packing slip and the enclosed contract all showed that the contract was not formed at the time of the telephone conversation, but when the customer received the courier package and broke the seal on the box containing the mobile phone. The time of breaking the seal and becoming informed of the consequences was the time at which the customer would first be aware of the binding agreement with the company.

The effect of the finding that the agreement was formed at the customer’s residence triggered the application of the Act which requires that customers have been informed of their right to a ‘cooling-off’ period of seven days after the agreement is made in which they can cancel the agreement and return the mobile phone.

In situations where the Act has not been complied with by the initial giving of such information to the customer, as was found to be the case here, the customer is entitled to a further period of one month in which to cancel and return the mobile phone.

Fair Trading Act

The court determined that omission of the necessary cancellation statement and notice constituted misleading conduct under the Fair Trading Act 1986. The statements made were also found to be misleading conduct/
representations because the breach of the Act meant that customers had other rights of which they were not informed.

1 Commerce Commission v Telecom Mobile Limited [2004] 8 NZBLC 101,572 (High Court, Wellington, 23 June 2004)

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