The Commerce Commission has accepted legally binding commitments from KiwiRail to compensate customers impacted by cancellations of the Interislander ferry due to mechanical breakdowns.
"These commitments will put money back in the pockets of affected consumers, and crucially, set out a more straightforward path for getting a refund going forward when a ferry trip is cancelled," Competition, Fair Trading, and Credit General Manager Vanessa Horne says.
KiwiRail has committed to compensate all affected consumers, re-evaluate previous claims for compensation, and update its policies and terms and conditions to make sure they are in line with consumer law. The Commission can enforce these commitments in court if KiwiRail does not uphold them.
In early 2023, there were three mechanical issues that took Interislander ferries (Kaitaki, Kaiarahi) out of service and caused widespread cancellations. KiwiRail denied compensation requests from affected customers, and in doing so made statements which were likely to mislead consumers about their rights.
One statement was that KiwiRail was not liable for any loss caused by cancellation or delays, regardless of the circumstances. This likely stopped consumers from requesting refunds they were entitled to under the Consumer Guarantees Act and so its statement likely breached the Fair Trading Act.
Consumers were also likely misled when KiwiRail denied some claims for compensation after cancellations and delays due to mechanical breakdowns. KiwiRail claimed these mechanical breakdowns were beyond its control and so customers weren't entitled to compensation.
KiwiRail later accepted that at least one of the mechanical breakdowns could have been prevented. This would have likely entitled customers to compensation under the Consumer Guarantees Act.
KiwiRail has now committed to treating delays and cancellations caused by mechanical faults without an obvious cause, as within its control. This will be a key factor when deciding if affected consumers are owed compensation from KiwiRail.
"This was especially important for us as it will give consumers more clarity about their rights if delays and cancellations happen. It can be confusing and stressful to have travel plans cancelled and knowing what you're entitled to can help ease that anxiety," Ms Horne says.
In addition to the legally binding commitments (court enforceable undertakings), the Commission has issued a warning letter to KiwiRail.
Background
- The events investigated
- loss of power incident on the Kaitaki (28 January to 4 March 2023)
- heat exchanger issue on the Kaiarahi (February 2023)gearbox issue with the Kaitaki (4 March 2023 to 12 April 2023)
Court enforceable undertakings contain commitments from a person or business, which may include to stop doing something, make compensation payments, publish corrective advertising or pay costs to the Commission. If the party does not comply with their undertakings, then the Commission may apply to the Court to enforce the undertakings.
The Consumer Guarantees Act requires that services be provided with reasonable care and skill and be fit for purpose and sets out consumers' right of remedy where businesses haven't met these requirements.
The Commission has accepted Enforceable Undertakings from KiwiRail to record:
- KiwiRail's admission that its historical terms and conditions and some representations it made to consumers during the Review Period were likely to have misled consumers about their rights to compensation under the CG Act, which is likely to have breached section 13(i) of the FT Act;
- KiwiRail's commitment to reconsidering specified past and new compensation claims, and remediating consumers to ensure consumers receive correct compensation for ferry sailings that were cancelled or delayed for reasons within its control;
- KiwiRail's commitment to make further changes to the Interislander CoC to clearly acknowledge consumers' rights under the CG Act;
- KiwiRail's commitment to treat delays or cancellations caused by mechanical faults, where the cause is not immediately clear, as within its control, which is a key factor in determining whether KiwiRail may be liable to provide compensation to affected consumers; and
- the steps that KiwiRail will take to ensure ongoing compliance with the FT Act and the CG Act.
