High Court proceedings have begun with the New Zealand Commerce Commission seeking a declaration that online retailer Home Direct Limited’s consumer contracts contain unfair terms relating to it’s “voucher entitlement scheme”.

Home Direct sells household products through mobile and online shops, as well as by telephone. The retailer was found to have signed customers up to it’s “voucher entitlement scheme”, under which direct debits did not stop after goods purchased were paid off, instead being converted to “voucher entitlements” which could be used to purchase further goods from Home Direct.

The Commission alleges these vouchers could not be refunded or redeemed for cash, and expired after 12 to 24 months.

“The Commission seeks a declaration that these terms are unfair,” Commissioner Anna Rawlings said.

“In our view they create a significant imbalance in the rights and obligations of the parties and they are not reasonably necessary to protect the legitimate interests of Home Direct.”

This is the first time the Commission has sought a declaration of this nature since 2015, when it became unlawful under the Fair Trading Act 1986 to include, apply, or rely on terms have have been declared by a court to be unfair.

If a term is found to be deemed unfair by the High Court, a business cannot enforce it, or can be found liable for prosecution.

Home Direct has noted it is “disappointed” the Commerce Commission has taken this step in a statement provided to Inside Retail.

“Home Direct takes compliance very seriously,” Home Direct managing director Michael Wright said.

“We cooperated with the Commission during its recent investigation into the Voucher terms. It seems unusual they have now elected to issue civil proceedings over two minor terms when we have worked in good faith with them for years.”

Wright noted Home Direct are hardly the first retailer to issue vouchers with a no-refund clause, and that its voucher system originated as a product solution for budget management.

“We have worked hard to address the Commission’s concerns but do not consider the no-refund or expiry period terms are unfair as they are in line with many other retailers,” Wright said.