Retail, Innovation and Manufacturing reporter for the NZ Herald

Gym contracts under the Commerce Commission microscope

The Commerce Commission is reviewing terms and conditions in gym contracts which it says are often unfair. Photo / 123RF
The Commerce Commission is reviewing terms and conditions in gym contracts which it says are often unfair. Photo / 123RF

Gym memberships are the latest contracts being targeted by the Commerce Commission, in a crack down trying to ensure fair terms and conditions.

The Commission has previously looked at the energy retail sector and telecommunications sector, and a spokesperson said the review was ongoing.

"We are currently looking at standard form contracts in the gym sector as part of our Unfair Contract Terms (UCT) review," the Commission said.

"So far we have looked at 10 gyms of varying sizes including larger nationwide gym franchises, smaller operators, and both full service and 24 hour, seven day gyms. At this stage we hope to complete this by the end of the calendar year but that might change."

The Commision's investigation follows an earlier report from Consumer New Zealand which said many gyms were using outdated and unfair clauses to lock members into contracts that potentially breached the Fair Trading Act.

A ban on unfair terms in consumer contracts came into action in March last year but Consumer New Zealand chief executive Sue Chetwin said a few months ago that change hadn't been fast enough.

"Our review found the industry has been slow to respond to the law change," Chetwin said.

"Gyms often require 30 days' notice if you want to cancel after your minimum membership term ends. Some even include a clause saying your cancellation won't take effect until the gym confirms it in writing," she said.

"These terms make it unnecessarily difficult to end a gym membership and we think they're unfair."

The Commerce Commission said it had potential concerns about a number of terms in contracts, including the lengthy notice periods on cancellation, high cost of early termination fees and terms that made cancellation difficult.

An amendment to the Fair Trading Act last year was aimed at bringing New Zealand consumer law into line with Australia's.

Consumers having to pay termination fees when they want to cancel a contract after it is automatically renewed, or after the business puts up its price or makes other changes to its terms, are common examples of unfair terms.

A study by the University of Auckland's Business School found despite the law change, unfair terms and conditions were still in many contracts.

"The Unfair Contract Terms law is clearly not working," said study lead Associate Professor Alexandra Sims, Head of Commercial Law at the Business School.

"What's more worrying, is that consumers cannot challenge unfair contract terms - only the Commerce Commission can," she said.

"And unless an unfair term also breaches another part of the Fair Trading Act or the Consumer Guarantees Act, courts and tribunals are actually obliged to enforce an unfair term against the consumer."

The Commission has said that following its review, energy retailers have or are planning to, amend their contracts, but Sims said it shouldn't take a review to make contracts fair.

- NZ Herald

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