‘Text to win’ company pleads guilty to Fair Trading Act breach

An overseas-based company that ran a series of text to win trivia competitions has pleaded guilty to breaching the Fair Trading Act by not properly disclosing all the terms and conditions related to the competitions. They have been fined $125,000 and ordered to pay court costs of $1,560 in the Auckland District Court yesterday.

From July 2006 to January 2007 TMG Asia Pacific Pty Ltd promoted and operated a series of 14 text trivia competitions in New Zealand .

The competitions were promoted through television advertising which was broadcast on TV1, TV2, TV3, C4, MTV and Prime. The competitions required participants to answer five trivia questions via SMS text to enter a knock-out final round to win a prize.

The initial question to enter was contained in a television commercial, with the following four questions being sent by text to the participant.

The television commercials failed to adequately disclose that, by sending a text to answer the initial question, participants were entering into a premium SMS subscription service, where they would receive five text messages per month charged at $3.00 per message received. This would have been at a cost of a minimum of $15 a month until the recipient opted out.

“To avoid the risk of breaching the Fair Trading Act, disclosure of all terms and conditions relating to a service must be clear and not have the potential to mislead consumers,” said Greg Allan , Commerce Commission Manager Fair Trading, Wellington . “The Commission received a large number of complaints from consumers who were not aware that by answering a trivia question they were both entering a competition and subscribing to an ongoing service.”

“TMG should have ensured that all costs of their services, including those related to an ongoing subscription, were clear so that consumers had all the information they needed to be able to decide whether to take part in the competition,” Mr Allan said. “At the time TMG launched their product in New Zealand the concept of premium interactive services via SMS was relatively new and consumers were not generally aware of the cost implications of these services.”

“Interactive premium SMS-based services are now more common in the New Zealand market and consumers should always check terms and conditions carefully before committing to any service,” said Mr Allan.

“Overseas businesses operating in New Zealand should always seek independent advice to make certain that their products and services comply with all relevant New Zealand legislation,” said Mr Allan.

In January 2007, after being contacted by the Commission, TMG voluntarily ceased broadcasting its advertising and operating its competitions.

At the time TMG also voluntarily refunded consumers who complained directly to them and in December 2009 TMG advertised a further refund scheme. The two rounds of refunds returned approximately $15,000 to affected consumers. TMG cooperated fully with the Commission’s investigation.