The Commerce Commission alleged that in cold calls between February 2022 and July 2023, former HelloFresh customers were offered vouchers without being told that accepting them would reactivate their subscription to the service.
The regulator said several customers’ subscriptions were reactivated without their express knowledge or consent.
HelloFresh was facing five charges under the Fair Trading Act.
In court Thursday afternoon, prosecutor Danielle Houghton said the Commerce Commission was seeking a fine of $1.5-1.6 million.
Examples of cold calls that resulted in former customers’ accounts being reactivated were played in court.
In one call, a former customer said they would wait to see what HelloFresh sent through about a promotion they were offering before deciding to order more meal-kit boxes.
Another person explicitly stated during the call that they did not want their account reactivated, saying “I’m not committed am I at this stage if I don’t click on anything?”
But in both instances, the individuals’ accounts were reactivated.
The Commission said HelloFresh New Zealand made more than 1.2 million cold calls over an 18-month period, and more than 300,000 calls were answered. Almost 78,000 accounts were reactivated as a result.
They said 31.2 percent cancelled their reactivated subscriptions before getting any boxes, and 17.7 percent cancelled after getting one box.
They said HelloFresh ran the same promotion through email but only 3.4 percent cancelled before using it in that case.
The Commission said it received 424 complaints from New Zealand consumers about HelloFresh and its sign-up, re-activation, and cancellations process as a result of the re-activation campaign.
In court, lawyer for HelloFresh Peter Hunt said if someone’s account was reactivated after a phone call, they were sent an SMS text stating when they would receive a box and that they would be charged for it.
“This was not a subscription trap.
“This was not an orchestrated campaign to mislead.
“Any misleading effect of the conduct was very short-lived; it was very curable the reactivated account could be cancelled. Refunds were readily given, and orders were taken away.”
He said the company conceded the management of its call centre staff was sub-par, and that resulted in over-enthusiastic sales representatives going “off-script”.
He accepted that while call centre staff received a script during their training, which mentioned account reactivation, he was not clear if it was stipulated that they must follow it.
But Houghton said a number of consumers reported not getting an SMS, or they disregarded it because they thought the phone call made it clear their subscription would not be reactivated.
The court heard a third-party provider ran HelloFresh’s call centre in Zagreb, Croatia, but the company’s growth management team developed the script. The script was then developed for the New Zealand market.
Houghton criticised the company for trying to shift the blame to call centre workers.
“It cannot blame others, whoever they may be, for inadequate guidance of call centre agents,” she said.
She said the script HelloFresh provided was misleading and framed as a consumer survey.
She told the court call centre workers were expected to make 20 calls and achieve two reactivations per hour.
HelloFresh earlier pleaded guilty to all five Fair Trading Act charges.
Hunt said the company took the charges seriously.
“Charges have been admitted at the first opportunity,” he said.
He suggested a $900,000 starting point for a fine.
The court agreed with the Commission the former customers’ subscriptions were reactivated unlawfully.
In her summary, Judge Kathryn Maxwell said HelloFresh call centre employees “glossed over customer resistance and hesitation” and used “ambiguous language” in cold calls.
She said it was clear this had caused harm, with one complainant stating that money deducted from their account was their food budget for the week. She said a number of those charged were referred to debt collection.
She was critical of the company’s call centre workers’ remuneration structure, saying it incentivised getting sign-ups over accuracy.
She said complainants described the process of cancelling their subscription once it had been reactivated as challenging and not straightforward.
She said the subscription could not be cancelled on the HelloFresh app, and there was no contact Hello Fresh directly, and only if an AI chatbot could not resolve their issue were they able to talk to a real person.
She noted that HelloFresh only refunded 258 out of 424 complainants.
The court also heard HelloFresh only began tracking complaints about reactivations in January 2023, and Judge Maxwell said the number of people affected could be even greater.
She decided on an $845,000 fine from a $1.3 million starting point, after making a 35 percent allowance for early guilty pleas, and because the company had no previous convictions.
