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Canadian Competition Bureau cracks down on prepaid calling card companies

Date: 3/27/2008 10:33:21 AM

Government crack downs on the prepaid industry are not isolated to the United States. North of the border, the Government of Canada’s Competition Bureau has started an initiative to ensure accurate disclosure of information from prepaid calling card providers.

“We have been involved in the prepaid telephone card industry for the last couple of years,” Derm Jardine, assistant deputy commissioner of the Competition Bureau, says. “We’ve received somewhere in the vicinity of 500 complaints since 2002.”

The complaints include card companies providing fewer minutes than advertised, charging hidden fees (for example, administration fees) and charging higher perminute rates than advertised. These complaints prompted the Bureau to work with companies to take action.

“We work with the companies on an ongoing basis to deal with marketplace issues, and in this case, the real issue was how to properly advertise the value of these cards for consumers so they weren’t misleading,” Jardine says. “It was through discussions with Gold Line (a Canadianbased prepaid phone car provider) that we came up with the Minimum Standard of Disclosure.”

Businesses must conform to the Minimum Standard of Disclosure, three concrete rules the Bureau adopted to address the problem. The Bureau will monitor prepaid companies in Canada to ensure they disclose more accurate information. The rules are:

• Disclose the effective rateperminute and the number of minutes available on the card.

• Disclose any conditions that might adversely affect the advertised rateperminute and number of minutes near the main body of the representation – this information should not be printed in a small font or appear on a background that obstructs its visibility.

• Discontinue the use of fine print disclaimers that contain information contradicting the main message – the main body of the representation should not be misleading when read alone.

“Companies have a number of different cards that satisfy a number of different niche markets,” Jardine says. “In some cases, there’s no need to provide any further information than the basic rateperminute and the value of the card directly. In other cases, that’s not necessarily so.”

Early returns

In most countries, government agencies that interfere with free markets are seen as negative, especially from the big business point of view. However, if the early responses are any indicator, there are businesses that see governments’ involvement as a positive influence. Although the Canadian initiative is fairly new, the initial response from prepaid companies is positive.

“They’re happy that they have a standard they can use in doing the advertising of their phone cards,” Jardine says. “So, the initial response, which is probably a little too early to know, is fairly positive right now.”

Some friendly advice

With plenty of Canadian prepaid phone card companies scrambling to meet the newly adopted standards of the Competition Bureau, here is Jardine’s advice on how to move forward.

• “The first (piece of advice) is to disclose the effective rateperminute and available minutes on the card. That’s the general impression companies are using to attract customers to their products. So, we’re saying, ‘identify on that ad what is the effective rate—i.e. what are you going to get when you buy that card.”

• “Then, if there are any conditions [on the card] that could adversely affect the advertised rateperminute or the number of minutes, you should make those known very close to the main body of the representation because this is information that a customer would need to know, and it is useful for them in making their decisions.”

• “(Lastly), we discourage the use of fine print disclosure. We have had information news bulletins dating back to 1986 on the use of fine print disclosure. In essence, it says you should not use fine print disclosure that basically nullifies that general impression that you’re giving. In fact, in a lot of these cases, what we’ve seen in the phone card industry with these fine print disclosures, once you take them into account, there is no way anyone can ever figure out what the effective rateperminute is on these calling cards. We have actually challenged the companies to tell us, and they weren’t able to do it when they took into account all the fine print disclosures.”

What to expect in the future

The Bureau has some clear goals in mind for the future of the prepaid industry. Their goals can be boiled down to one word: disclosure. This particular goal of the Bureau does not just apply to prepaid, but to all industries.

“We’re looking for disclosure in general, not just in the prepaid industry,” Jardine says. “This is just one in particular that we’ve now reached an agreement with some of their major players. When the consumer goes out and has a specific need in mind, they should be able to look through the various products – through the advertising – and determine what card will best suit their needs. When they buy that card, (they should) be given the actual product that they paid for.”

For the prepaid industry, not just in Canada but the whole world, it appears governmentimposed regulation – in some way, shape or form – has been adopted or is on its way. The scammers and conartists have officially been put on notice. The companies who have played by the rules the whole time in this freeforall industry are finally getting some long overdue vindication.

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