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Commerce Commission takes tougher stance than expected in Telco review

Written by Darryl King, PARTNER on May 2nd, 2016.    

Unfair Contract Terms in Consumer Contracts

Telco JR

In March 2015 new rules came into force prohibiting the use of “unfair” terms in standard form consumer contracts. In February 2016 the Commerce Commission released a report on unfair contract terms (UCT) in the telecommunications sector.  The full report, available here, contains the first industry review by the Commerce Commission.  The Commerce Commission has taken a tougher stance than many expected and businesses that sell direct to consumers should review their standard form consumer contracts to take into account that tougher stance.

The Commerce Commission reviewed 19 standard form consumer contracts from seven telecommunications businesses.  Even though the majority of these businesses had already reviewed their contracts and made efforts to ensure they complied with the UCT provisions before they were introduced, the Commerce Commission identified 66 terms that could potentially be unfair.  The Commerce Commission worked with the companies involved to amend the relevant contracts. 

Do the UTC rules apply-585

Key points from the telecommunications report 

The most common terms identified as potentially unfair were terms that:

1. limit or exclude the liability of the supplier;
2. allow the company to unilaterally vary the contract;
3. make the customer responsible 
for unauthorised charges on the customer’s account; and
4. allow the company to avoid liability for consequential loss. 

An unfair term can be justified if it is reasonably necessary to protect the legitimate interests of the business.  However the Commerce Commission’s report indicates that the threshold for this justification is reasonably high as the Commerce Commission rarely agreed with the telecommunications businesses when this justification was used.

Which sectors will the Commerce Commission target next? 

The Commerce Commission intends to target the electricity retail, credit and gym sectors next. Other industries should not be complacent though as they need to ensure they are compliant now.  A business in another industry could easily be put under scrutiny if the Commerce Commission receives a complaint from a customer.  

We encourage all businesses that sell to consumers to review their standard form consumer contracts to take into account the Commerce Commission’s views.  Businesses cannot contract out of their liability to consumers under the UCT provisions so it is essential you ensure your terms comply. If you have any questions or need assistance reviewing your standard form contracts please contact your usual Jackson Russell lawyer or one of the lawyers below.


The information contained in this publication is of a general nature and is not intended as legal advice.  It is important that you seek legal advice that is specific to your circumstances.
All rights reserved © Jackson Russell 2016


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