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«MISLEADING OR DECEPTIVE CONDUCT IN HONG KONG TELECOMMUNICATIONS MARKETS 1. INTRODUCTION 1.1 These guidelines (“the Guidelines”) are issued by the ...»

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TELECOMMUNICATIONS AUTHORITY GUIDELINES

MISLEADING OR DECEPTIVE CONDUCT

IN HONG KONG TELECOMMUNICATIONS MARKETS

1. INTRODUCTION

1.1 These guidelines (“the Guidelines”) are issued by the Telecommunications

Authority (“TA”) under section 6D(1) of the Telecommunications

Ordinance (Cap. 106) (“the Ordinance”) for the purpose of providing practical guidance on section 7M of the Ordinance. Section 7M prohibits a licensee from engaging in conduct which is misleading or deceptive in providing or acquiring telecommunications networks, systems, installations, customer equipment or services.

1.2 The Guidelines explain how the TA will apply and enforce the provisions of section 7M and outline the approach that the TA will take when forming his opinion for the purposes of section 7M. The Guidelines cannot and do not aim to provide a definitive response to any particular conduct, but rather they are a guide as to when conduct may fall within the prohibition contained in section 7M. Determining whether any particular conduct is misleading or deceptive requires a consideration of the specific facts of each case. The Guidelines are intended for use by participants in the telecommunications industry and consumers to ensure parties know their rights and obligations under the Ordinance. The TA will not depart from these Guidelines without providing reasons in writing for doing so1.

1.3 The Guidelines state the TA’s current views and procedures in relation to the enforcement of the prohibition on misleading or deceptive conduct.

They are not exhaustive and will be updated and reviewed in the light of changing circumstances. It is impossible to anticipate all possible future business initiatives or innovations. Accordingly, even if a particular matter or issue or type of conduct is not mentioned in the Guidelines, it does not follow that the TA will not be concerned about that conduct.

1.4 The TA issued a voluntary Advertising Code of Practice (the “Advertising Code”) in 1996 following industry consultation. The Advertising Code sets out basic guiding principles in relation to the promotion of telecommunication services. The TA takes the view that the enactment of section 7M and the publication of these Guidelines supercede the Advertising Code in so far as it deals with matters addressed by section 1 Section 6A(3)(b)(ii) of the Ordinance 1 7M. In future the TA will deal with complaints about advertising only under section 7M and in accordance with these Guidelines.

–  –  –

1.6 The obligations of licensees under section 7M are additional to obligations that may arise under the Unconscionable Contracts Ordinance (Cap. 458) and other applicable laws, including the Sale of Goods Ordinance (Cap.

26), the Control of Exemption Clauses Ordinance (Cap. 71) and the Supply of Services (Implied Terms) Ordinance (Cap. 457).

2 Section 6A(3)(a) of the Ordinance.

–  –  –

2.1 Section 7M states that:

“A licensee shall not engage in conduct which, in the opinion of the [Telecommunications] Authority, is misleading or deceptive in providing or acquiring telecommunications networks, systems, installations, customer equipment or services including (but not limited to) promoting, marketing or advertising the network, system, installation, customer equipment or service.”

2.2 The prohibition in section 7M contains the following elements:

–  –  –

• in providing or acquiring telecommunications networks, systems, installations, customer equipment or services.

2.3 The following paragraphs set out the TA’s approach to the practical application of the elements of section 7M.

Conduct

2.4 The concept of “engaging in conduct” includes both direct and indirect conduct and includes acts and omissions. Section 7M applies to a wide range of transactions and includes any form of conduct directed to the general public. It includes, for example, the distribution of promotional materials, telemarketing calls, causing salespersons to call on residents, television, radio or print commercials and other selling or marketing initiatives.

2.5 Examples of types of conduct the TA is likely to be concerned about are set out in more detail in Part 3.

Licensees

2.6 Section 7M applies to licensees. However, a licensee may be liable under

section 7M for conduct by its:

–  –  –

2.7 Licensees should ensure that they have sufficiently robust systems and controls in place regarding information made available to employees or other relevant persons to prevent any possibility of misleading or deceptive conduct on their part. The existence and operation of such systems and controls will be relevant in the assessment by the TA of penalties imposed on a licensee found to be in breach of section 7M (see discussion under “Penalties” in paragraph 4.5 below).

2.8 In general, whatever a licensee has the power to do itself may be done by an agent. The authority to act on behalf of a licensee may be actual or apparent. Where a licensee’s agent engages in misleading or deceptive conduct, the licensee, as principal, will usually be liable for those actions, unless the agent has acted outside the scope of the actual or apparent authority. Licensees will need to submit evidence to support any claim that their agents have been acting outside their authority. The TA is unlikely to accept these claims where the conduct is repeated or sustained over a period of time.





2.9 Furthermore, licence conditions may specify the responsibility of the licensee. For example, General Condition 11.1 of the Fixed Carrier Licence provides that the licensee is responsible for compliance with the licence conditions (which includes compliance with the Ordinance) by any person with whom it has entered into a contract for the purpose of the service. Therefore, where a licensee subcontracts some of its services and the subcontractor engages in misleading or deceptive conduct, the licensee may be liable for that conduct under the terms of its licence.

The TA’s opinion

2.10 The TA must form an opinion as to whether a licensee is engaging, or has engaged, in misleading or deceptive conduct. In forming his opinion, the TA will make an assessment of all of the circumstances of the conduct.

He will examine the facts and ask whether a “reasonable person” would be misled or deceived by the licensee’s conduct.

2.11 A “reasonable person” is an ordinary member of the target audience of the conduct; that is, a person at whom the conduct is directed. If, for example, a licensee runs an advertising campaign in the local newspaper, the target audience (and, accordingly, the care required of the licensee to ensure the “reasonable person” in the target audience is not misled or deceived) may be different from the target audience and the care which is required of a licensee when offering a service to large corporate customers. In other 4 words, the level of comprehension expected, and therefore the standard of care required by the licensee, will differ depending on the target audience.

2.12 Ordinary consumers can usually be taken to have some knowledge of the product or service they are buying and to be able to read simple terms and conditions. However, if products are new or complex, knowledge cannot be assumed and consumers will most likely require more or clearer information about the product or service.

Misleading or deceptive

2.13 Jurisprudence in other jurisdictions suggests that the use of both the words “misleading” and “deceptive” is tautologous. To avoid any doubt, the TA’s approach is that these are separate categories of conduct and, for a licensee to be in breach of section 7M, the TA must form an opinion that a licensee’s conduct is either misleading or deceptive. It is not necessary for the TA to form an opinion that conduct is both misleading and deceptive, although conduct which is deceptive is also likely to be misleading.

2.14 It is not necessary for there to be any intent by a licensee to mislead or deceive for the TA to form an opinion that the licensee’s conduct is misleading or deceptive. Where a licensee intends to mislead or deceive, however, this may influence the nature of the penalty imposed by the TA for breach of section 7M (see discussion under “Penalties” in paragraphs 4.5-4.9 below).

2.15 A licensee’s conduct need not be proven to have actually misled or deceived anyone for that licensee to be in breach of section 7M. The TA does not require evidence that someone has actually been misled or deceived to find a licensee in breach of section 7M; although such evidence will often be a persuasive factor in considering whether a “reasonable person” would have been misled.

2.16 It is not the purpose of these Guidelines to identify exhaustively all conduct which will be taken to be misleading or deceptive. Part 3 of the Guidelines sets out a number of areas of particular concern.

Providing or acquiring telecommunications networks, etc

2.17 Section 7M applies broadly to protect participants in many different types of transactions common to telecommunications markets. A licensee must not mislead or deceive in the provision or acquisition of telecommunications networks, systems, installations, customer equipment or services.

2.18 The terms:

–  –  –

telecommunications installation;

• customer equipment; and • telecommunications service, • are defined in section 2(1) of the Ordinance.

–  –  –

3.1 This Part of the Guidelines identifies, in more detail, the TA’s approach to some particular types of conduct that typically raise concerns. It is impossible, however, to anticipate all the circumstances that may give rise to concern because the concept of misleading or deceptive conduct is wide.

There may be other conduct, not mentioned below, which can be misleading or deceptive.

3.2 Section 7M refers specifically to promoting, marketing and advertising as particular types of conduct. However, it should be noted that the section is not limited to this type of conduct. Selling, promotions and advertising generally have been the focus of many complaints to the TA, with the bulk of complaints relating to popular press advertising. However, any type of conduct which is misleading or deceptive is prohibited by section 7M.

3.3 When promoting, marketing or advertising telecommunications products

or services, licensees should always:

• be able to substantiate any claims made - licensees should hold documentary evidence to prove claims, whether direct or implied, that are capable of objective substantiation;

–  –  –

• ensure the full cost of the product or service is clearly stated or easily ascertainable at the time of purchase and, if relevant, at the time the product or service is marketed or promoted.

3.4 In determining whether promoting, marketing or advertising telecommunications products or services is misleading or deceptive, the TA will take into account all information provided by the licensee and any

complainant, including information concerning:

• the characteristics of the products or services;

–  –  –

• if relevant, the nature, attributes and rights of the licensee (including, for example, its identity and ownership of intellectual property rights).

–  –  –

Advertising Puff 3.6 Puffery, or boasting about a product or service, is common in commerce and consumers can be expected not to take advertising “puff” too seriously.

Advertising puff can be described as wildly exaggerated or fanciful claims that no-one could possibly treat seriously, and that no-one can reasonably be misled by. However, puffery will be misleading where facts are wrong or distorted. In determining whether conduct is mere puffery or is actually misleading or deceptive, the TA will assess the conduct through the eyes of a reasonable person, taking into account the nature of the target audience.

3.7 It is acceptable to extol the particular benefits of a product or service and to highlight the savings a consumer may receive, but it is not acceptable to misrepresent the nature of those benefits or the amount of actual savings.

Claimed savings must be true and be able to be fully substantiated.

Misrepresentations 3.8 Misrepresentations are incorrect or false statements and can be either oral or written or a combination of the two. There are many possible types of misrepresentations. In some cases, a misrepresentation may come about as a result of a statement or information which is wrong or inaccurate, leaves out important facts or creates a false impression.

3.9 In the UK, a service provider was found to have misrepresented that customers’ existing telephone numbers were at risk because of compulsory changes to the numbers which were being brought in by the regulator. In fact, the changes were merely proposals at that stage and were not yet compulsory3.

3.10 It may also be misleading or deceptive conduct to represent that certain statutorily implied terms have been excluded when such terms cannot, in fact, be excluded as a matter of law 4. For example, under the Control of Exemption Clauses Ordinance (Cap. 71), it is not possible to exclude or limit liability for breach of the seller’s obligations under the Sale of Goods Ordinance (Cap. 26). The TA considers licensees purporting to do so may have engaged in misleading or deceptive conduct in breach of section 7M.

3 UK Office of Telecommunications complaint against Cable and Wireless, case reference BX/879/017 (September 1997) 4 See, for example, the Sale of Goods Ordinance (Cap. 26), the Control of Exemption Clauses Ordinance (Cap. 71) and the Supply of Services (Implied Terms) Ordinance (Cap. 457)

8Silence or Deception by Omission



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