Contact, Nova taken to task over GST-exclusive pricing by Commerce Commission

The Commerce Commission has taken energy companies Contact and Nova to task over the way they market their services. Photo / Supplied

The Commerce Commission is warning Contact and Nova to stop GST-exclusive pricing by default – a practice that shaves 15% off the headline price displayed to consumers.

The two are leading providers of bundled energy and broadband services.

”This is something we don’t see anywhere else in the retail space and creates the illusion of savings that don’t exist,” telecommunications commissioner Tristan Gilbertson said.

The commission’s challenge follows a review of guidelines issued in November last year to address concerns about the way providers were marketing bundled services – which often lacked clarity and obscured costs.

”We’re pleased that providers have cleaned up their marketing,” Gilbertson said.

“They’ve stopped the practice of luring consumers into bundles with sharp upfront broadband discounts, while increasing power prices at the back end, which usually offset any savings,” he said.

However, he said the commission was concerned that Contact and Nova persist with GST-exclusive pricing by default, when a fully loaded retail price is what most Kiwis are accustomed to seeing.

“With escalating electricity costs, and wider cost-of-living concerns, it’s unhelpful for energy providers to make their prices look cheaper than they really are.

“It’s inherently confusing to combine GST-inclusive broadband and GST-exclusive energy pricing in the same bundle.”

Gilbertson said the commission is pleased the other main providers – Mercury, Electric Kiwi, Pulse Energy and 2degrees – have amended their conduct and are complying with all key requirements.

The commission encouraged consumers to take care to ensure they’re comparing the right numbers when looking at bundles from Contact and Nova, given the difference 15% can make on the total price.

The energy and broadband bundling guidelines were designed to increase transparency and reduce consumer confusion. . The commission said bundling has been one of the fastest-growing segments of the broadband market over the past two years – attracting a total of nearly 300,000 consumers.

There are six main providers of bundled energy and broadband services: Mercury, Contact, Nova Energy, Electric Kiwi, Pulse Energy and 2degrees.

The commission’s recent review of compliance found that providers have amended their conduct and are complying with all key requirements except for Contact, Nova, and Pulse in relation to the GST-inclusive pricing requirement.

Pulse has committed to correcting its conduct, it said.

Nova Energy, part of Todd Corp, is the fifth-largest electricity retailer in New Zealand, and is one of the largest wholesalers and retailers of natural gas.

The company retails energy, broadband, mobile phone and EV charging services to homes and businesses under three brands: Nova Energy, Megatel and Wise Prepay.

NZX-listed Contact - an energy generator and retailer - offers electricity, gas, broadband and mobile phone services.

Approached for comment, Contact said there was no difference in its electricity prices with, or without a broadband bundle.

“Part of the commission-issued retail service bundling guidelines require that we present both energy and telco prices as GST inclusive by default,” it said.

“Contact presents all broadband prices as GST inclusive by default.

“However, there is inconsistency across the electricity market about presenting as GST inclusive or exclusive,” the company said.

Contact said it had included a toggle to show both GST inclusive and exclusive rates.

In its response, Nova said that after receiving the Commerce Commission’s initial assessment regarding its compliance to the Retail Service Quality Bundling Guidelines (Energy and Telecommunications Bundles) in September, the company promptly made alterations in the same month to address two compliance issues identified.

“Following initial feedback from the Commerce Commission, Nova made alterations so customers can easily see both GST inclusive and GST exclusive pricing during the sign-up process,” the company said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.