Mercury fined $279,500 for misleading customers over early termination fee

One of New Zealand’s largest electricity retailers Mercury NZ Limited (Mercury) has been fined $279,500 for communicating to about 2000 customers that they were required to pay an early termination fee when they were not, breaching the Fair Trading Act, says the Commerce Commission.

The commission expects all businesses, no matter their size, to have robust processes and systems in place, says its fair trading general manager Kirsten Mannix.

“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.”

Changes to Mercury’s terms and conditions in 2016 meant that customers cancelling an automatically renewed fixed term plan would no longer be required to pay an early termination fee, the commission explains.

“However, between 2017 and 2020 Mercury communicated to some residential customers, who were cancelling auto-renewed contracts, that they were required to pay the fee.

“Some customers were also told that the fee would be waived if they remained a Mercury customer,” the commission adds.

“Our investigation identified problems within Mercury’s billing systems, resulting in representations that misled a number of customers,” Mannix says.

Mercury issued invoices to about 2000 customers that incorrectly included the early termination fee, and on occasion made the misrepresentations via email or over the phone, says the commission.

In a reserved decision released by the Auckland District Court on May 2, 2023, Judge Lance said the representations were a material departure from the truth that endured for a reasonably lengthy period.

“[…] 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.”

Mannix says that businesses must ensure they give consumers an accurate picture of their rights – whether that is in writing, or over the phone – and consumers should not be asked to pay for something where a payment is not due.

“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.”

Mercury has refunded almost all customers who were incorrectly charged and paid an early termination fee.

If consumers think they have been incorrectly charged an early termination fee, they are encouraged to reach out to their provider, the commission says.

A copy of the Judge’s sentencing notes will be made available on the commission’s case register shortly.

Mercury commercial operations general manager Craig Neustroski says the incident took place between 2016 and 2020.

“We’re extremely disappointed it occurred,” he says.

“We acknowledge we got things wrong in this case – it was a genuine mistake and we have focussed on making things right as quickly as possible.

“We completed remediation almost two years ago, which included apologising to impacted customers, providing refunds and a small additional payment in acknowledgment of our error.

“In a small number of cases in which we have been unable to locate an impacted customer, we have set aside their unclaimed credit which will be refunded when we locate them and at the same time donated the equivalent of their unclaimed credit balance to Starship.”