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26 May 2023

Mercury fined $297,500 for misleading customers over early termination fees

Electricity retailer misled customers on early termination fees from 2017 to 2020.

Mercury, one of New Zealand’s largest electricity retailers, has been fined $297,500 for telling customers they were required to pay an early termination fee when they were not.

Mercury

In 2016, Mercury changed its terms and conditions, ending early termination fees for customers who cancelled automatically renewed fixed term plans.

However, between 2017 and 2020, Mercury continued to tell residential customers who were cancelling their auto-renewed contracts that they were required to pay the fee. Mercury issued invoices including the early termination fee to approximately 2,000 customers, while also informing customers about the fee via e-mail and over the phone. Some customers were told that the fee would be waived if they remained customers.

The Commerce Commission’s general manager of Fair Trading, Kirsten Mannix, said that the investigation “identified problems within Mercury’s billing systems, resulting in representations that misled a number of customers.”

This represented a breach of the Fair Trading Act.

In a reserved decision released by the Auckland District Court on the 2 May 2023, Judge Lance said that these communications misinformed consumers for a lengthy period, emphasising the nature of electricity as an essential service.

“Retail electricity services are an essential consumer good for all households. It can be a significant ongoing expense. Accordingly, traders who supply essential services do have a responsibility to ensure that representations to consumers are not misleading,” Judge Lance said.

While this issue stemmed from a change in terms and conditions, Mannix said, “it’s vital that staff are trained properly and told about any system changes or failures to ensure that consumers are only told correct information and are not misled.

“It’s vital that staff are trained properly and told about any system changes or failures to ensure that consumers are only told correct information and are not misled.”

However, this issue goes beyond misinforming customers, with Mercury’s actions having implications for consumers trying to get the best deal.

“Not only can misrepresentations like these cause stress and harm to consumers, electricity retail is an essential service, and the ability of consumers to switch providers in line with the contracts is vital to maintain a competitive market,” Mannix said.

Paul Fuge, the manager of Consumer NZ’s Powerswitch service, believes that auto-renewal and early termination fees prevents consumers from taking advantage of potentially cheaper electricity providers by switching.

“Unfortunately, many consumers are unaware just how much they can save by simply changing to a different power plan or provider. Our latest statistics from Powerswitch show that consumers can make an average annual saving of $385 by switching their electricity retailer or power plan,” Fuge said.

Mercury has refunded almost all customers who were incorrectly charged the early termination fee. The Commission says that if consumers think they have been incorrectly charged an early termination fee, they should contact their provider.

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