Commerce Commission fines Telecom over false broadband claims

7 Dec 2009

Incumbent operator Telecom New Zealand will face an outlay of over NZD8.9 million (USD6.37 million) after admitting to 17 charges of breaching the Fair Trading Act by making false claims about the speed of its broadband internet service. The firm faces an initial fine of NZD500,000 after pleading guilty to the allegations in an Auckland court and will also pay over NZD8.4 million in compensation to 98,700 affected customers. The offences go back to 2006 when Telecom’s Xtra internet service provider (ISP) undertook an extensive nationwide promotion for its ‘Go Large’ broadband, claiming ‘unlimited data usage and all the internet you can handle’ and ‘maximum speed internet.’ The commission began investigating in December 2006 following complaints from Xtra customers who found that their internet speed was constrained. Graham Gill, fair trading manager at the Commerce Commission of New Zealand, said: ‘There is increasing choice in the broadband market, and it is important that all relevant information is disclosed to consumers so that they can make informed decisions. Businesses invest time and money in marketing campaigns to attract new customers. To avoid the risk of breaching the Fair Trading Act, business should ensure that their goods and services can live up to any marketing hype – in this case Telecom clearly failed to do so.’ The commission said it had prosecuted or negotiated settlements with Telecom and its internet and cellphone divisions seven times since 2003.