Calling card company fined $100,000 for misleading advertising

An international calling card company has been fined for misleading advertising after the Commerce Commission found a phone call to China cost more than the advertised rates. File photo / Thinkstock

An international calling card company has been fined $100,000 for misleading advertising.

The company pleaded guilty to 33 charges under the Fair Trading Act and was sentenced at the Auckland District Court today.

Tel Pacific advertised its Hello Asia Pacific, Hello India, Island Talk, Friends, and Joy pre-paid international calling cards in the windows of dairies and news agents around New Zealand.

The calling rates were displayed in bold, large type while conditions such as surcharge rates, connection and disconnection fees and daily service fees were advertised in small type at the bottom.

The cards were also targeted at people who spoke English as a second language.

The Commerce Commission said the rates advertised were misleading because a caller could only avoid additional fees if they made one continuous call.

According to submissions from the Commission, that would require a consumer to make a non-stop call to Canada of 11 hours or over six hours to Bangladesh.

The Commission ran a series of test calls to China. The per minute cost to China was advertised at 5.97 cents a minute and a 30-minute call should have cost $1.79.

However, the call cost the Commission $6.20 due to being charged a minimum of 30 minutes, a service fee of $2.40, a $1 surcharge and $1 for a disconnection fee.

Tel Pacific disputed the example in court. The company's lawyer, Mark Donovan said the cost of the call would actually be $4.19.

However, Judge Greg Davis said what was not in dispute was that the call would cost "significantly more" than what a customer would expect to pay.

He said Tel Pacific had generated $3.7 million and sold 440,000 cards between November 2008 and November 2009, despite the Australian-owned company saying they had not made a profit in New Zealand.

Judge Davis gave the company a discount for co-operating with the commission and an early guilty plea.

He also noted that the company had made changes to its advertising, particularly to the font size of the conditions.