Education provider fined $351,000 for egregious conduct

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Wellington, December 26, 2017

Mathematics education company ‘Auckland Academy of Learning Limited’ (AAL) was fined $351,000 for conduct which the Judge described as ‘egregious’ last month.

AAL pleaded guilty to 11 charges under the Fair-Trading Act and was sentenced in the Auckland District Court on November 28, 2017.

In declining to offer a discount on sentence for financial circumstances, Judge Noel Sainsbury said, “If this fine means this company is not viable, that is a consequence of egregious conduct and so be it.”

Misleading test

AAL salespeople made misrepresentations while trying to sell an educational software programme known as CAMI (Computer Aided Mathematics Instruction) to consumers in their homes. They also failed to fully notify consumers of their rights to cancel the contracts they entered during the required ‘cooling off’ period.

“AAL took advantage of parents’ and caregivers’ fears that children were not succeeding in school, and it used an inherently misleading test to encourage them to purchase an expensive product,” Commerce Commission Commissioner Anna Rawlings said.

Misrepresentation by staff

AAL cold-called consumers and identified homes with school-age children. Three of the charges were for misrepresentations made by AAL staff when they attempted to set up appointments to visit parents in their homes.

“Parents were told that they had been selected to receive an ‘evaluation and tutoring session’ in Mathematics and English, to determine whether their children had any ‘knowledge gaps.’ In fact, the true purpose of AAL’s visit was to sell the CAMI system,” Ms Rawlings said.

Three more charges

A further three charges were for representations about the ‘educational assessment’ given to children while at customers’ homes.

Judge Sainsbury said, “The assessment was given to the children did not reflect what it claimed to be. It was higher than their level. Inevitably. the children would fail. That would put pressure on the parents concerned about their education. I cannot see any conclusion other than that was planned and deliberate. It was cynical marketing targeting people that are vulnerable because of their natural concern for their children.”

Parents’ Response

In victim impact statements, parents said that AAL told them their children “were behind”, “had massive gaps” or “had failed miserably.”

The Parents said that they felt “guilted into buying CAMI” and like a “terrible parent.”

Three charges were for misrepresenting that parents needed to buy CAMI.

The Verdict

“This is not a case of rogue or overly enthusiastic sales reps and a company that was careless in its training or supervising. The basis for the misrepresentations was in the systems that the company set up. I consider that makes this serious offending,” said Judge Sainsbury.

Most customers purchased a 24-month subscription with a total cost of nearly $6200. Some purchased a 48-month subscription costing just over $11,000.

The sales visits were uninvited direct sales and the final two charges were for failing to give consumers oral notice of their right to cancel an uninvited direct sales contract within five working days.

Source: The Commerce Commission, Wellington.

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