Telecom to return users up to $18m

Telecom is facing an embarrassing $18 million bill for refunds on two years of calling and other charges paid by thousands of its customers under contracts that were last week ruled unenforceable.

On Thursday the Court of Appeal upheld a High Court ruling that Telecom had misled customers during 2001 and 2002 door-to-door and telemarketing campaigns for its 027 mobile service by failing to tell them about their rights under the Door to Door Sales Act.

The court also ordered that Telecom contact customers who responded to the campaigns and publish advertisements advising them the contracts they entered into with Telecom Mobile were unenforceable, and they may be entitled to refunds.

Commerce Commission chairwoman Paula Rebstock told the Business Herald the commission believed there were more than 14,000 phones sold on two-year contracts under the two campaigns and the money that could be refunded included both the initial payment and all the subsequent payments during the life of the contract.

The commission estimated this could cost Telecom up to $18 million, depending on the uptake of the refunds - " ... that's why the corrective advertising will be so critical".

"This is not a victimless offence here," said Rebstock. "Not only did they potentially harm consumers, they potentially harmed their competitors."

The Court of Appeal decision was important, she said.

"It's a big precedent given the widespread use of telemarketing right now."Ms Rebstock said the commission expected to receive other complaints about telemarketing as a result of the ruling.

Telecom has said it was likely to appeal against the decision to the Supreme Court.

The 027 phone deal

* Telecom ran two door-to-door and telemarketing campaigns in 2001 and 2002 for its 027 mobile phone network using Appco, Mainly Mobile and Telnet Services.

* Unitec student Timothy Mansell of Glen Innes was one of more than 80 people who complained to the Commerce Commission about Telecom's offer.

* In July 2002 a door-to-door Appco salesperson sold him a Hyundai phone on Telecom's 027 network. She said it was better than his Nokia phone which was on rival Vodafone's network.

* When Mansell received the phone several days later he opened the package and after using it for a short time found it wasn't as good as his previous phone. He packaged up the new phone and sent it back to Appco and also paid $3.01 for calls he'd made.

* But Appco then told Mansell that as he had broken the seal on the packaging he had signed up for a two year contract. If he didn't want to continue on the contract he would have to pay a $100 disconnection fee and pay two years' worth of monthly charges. Mansell was also told if he didn't pay his credit rating would be affected.