Telemarketing co fined $168K for 'slamming' customers during Slingshot campaign

Telemarketing company Power Marketing Limited has been fined $168,750 after pleading guilty in the Auckland District Court today to 23 charges under the Fair Trading Act. The charges related to misrepresentations the company made during telemarketing calls on behalf of telecommunications company Slingshot.

This brings the total fines in the case to $418,750. In December 2013, Slingshot pleaded guilty and was fined $250,000 for its role in the misrepresentations.

The Commission received many complaints from 2009 to 2011, including one from Telecom, alleging that Power Marketing misled customers about the service provided by Slingshot or by switching customers to Slingshot’s services without their consent, known in this industry as “slamming”.

Power Marketing was employed to cold-call customers hoping to sell them Slingshot’s telecommunications services. Power Marketing conducted an initial sales call to ask if a customer wanted to switch from their current telecommunications provider to Slingshot. It was in the course of this call that telemarketing staff sometimes misled consumers to induce them to switch their telecommunication accounts to Slingshot.

After the sales call, another member of Power Marketing’s team would call customers back claiming that they needed to verify their details. This second call was actually to seek permission to switch companies but these conversations were often vague, hurried and left consumers confused about what they had or hadn’t agreed to.

In some cases this second call purported to verify prior agreement from the customer to switch to Slingshot, when no such agreement had actually been made. This conduct persisted for a period of more than a year.

“This was very poor behaviour on the part of this marketing company. The telemarketers were desperate to make sales by whatever means possible. This is particularly disturbing as Power Marketing senior management were aware of an earlier warning by the Commission to Slingshot about similar conduct, but they continued to push staff to keep up their sales targets,” said Commerce Commission Consumer Manager, Stuart Wallace.

“It also had quite an impact on the individual consumers affected. Even more troubling in this case is that many of those affected were elderly and had no real interest in switching,” said Mr Wallace.

“We’re hopeful that new consumer laws that came into effect recently should help in cases like this. For door-to-door and telemarketing sales, there is now a five-day cooling-off period for consumers where they can cancel a contract for any reason. Plus, an increase in the penalties for these types of breaches should act as a deterrent for businesses,” concluded Mr Wallace.

An aggravating feature of Power Marketing’s offending was that it improperly used a database owned by Telecom – Wireline – that contained private account information of Telecom customers. This was of significant benefit to Power Marketing as the transfer of the prospective customer’s service could not have occurred without the information obtained from Wireline.

"Good job"
Earlier, as Slingshot copped a $250,000 for its role in the misrepresentations, Chris Quin, CEO of Spark's Home, Business and Mobile division had no sympathy for the CallPlus-owned ISP, telling NBR "good job".

Mr Quin said although Slingshot's conviction related to 27 customer cases, Telecom received 679 customer complaints regarding Callplus/Slingshot between 2008 and 2011.

In 2010, Slingshot slam calls accounted for 67% of complaints escalated to Telecom’s investigating team.

Analysis of complaints showed a range of concerning practices, Mr Quin said.

These included not giving consent for their services to be transferred to Callplus/Slingshot, thinking they were talking to a Telecom representative, or being told it was mandatory to change from Telecom to Callplus/Slingshot.

‘"We believe that these complaints are likely to represent a small proportion of the total number of affected customers, as others might not have complained because they were unwilling to go through the hassle of transferring their services back to Telecom, or they simply did not understand why they started receiving bills from Slingshot,” Mr Quin said.

The exec said the Callplus/Slingshot practices had cost Telecom in terms of lost customer revenue, resources spent on investigating the issue, and legal expenses.

The damage caused by Slingshot's slamming is hard to put an exact number on but "it was enough for us to bring this action [complaining to the Commission]."

Today, Spark spokesman Richard Llewellyn welcomed the $168,750 fine imposed on Power Marketing, telling NBR it was a "slam dunk". 

Cooperated
CallPlus CEO Mark Callander told NBR as the $250,000 penalty was levvied, "We have accepted the findings of the Commerce Commission and the fine."

"We have cooperated fully with the Commerce Commission throughout this process and we have taken this matter very seriously. Most importantly, we have apologised to the 27 customers who were impacted by the actions of the third party telemarketing company, Power Marketing."