ACCC warns gyms about 'No Contracts' membership advertising

The Australian Competition and Consumer Commission (ACCC) has warned fitness clubs about using the phrase ‘No Contracts’ in advertising, where they required consumers to sign membership contracts with conditions for termination and payment of the membership.

Explaining that the ACCC considers this advertising to be misleading, ACCC Deputy Chair Dr Michael Schaper stated "gyms should not use attention-grabbing phrases like ‘No Contracts’ if they are misleading or deceptive.

“If a customer sees an offer of ‘No Contracts’, there should be no conditions on terminating the service or further payments required.”

The ACCC has been working with industry body Fitness Australia to encourage firms to check their advertising when using the phrase ‘No Contracts’ in these circumstances. In response to the ACCC’s concerns, several gyms have agreed to drop the use of the term.

The ACCC will continue to monitor gyms on this issue and will contact gyms identified as engaging in potentially misleading advertising of its membership contracts.

Misleading and deceptive conduct can carry penalties of up to $1.1 million per contravention of the Australian Consumer Law.

The ACCC considers that it is likely to be misleading for a gym to use the term ‘No Contracts’ in the following circumstances:

• When a consumer is required to sign a membership agreement which includes conditions in relation to termination of the membership such that consumers cannot cancel at any time;

• When a consumer is required to make a non-refundable advance payment for a membership term;

• When written notice of termination is required by the gym for a consumer to exit a membership;

• When a consumer is required to make payments during the notice period in order for termination of the membership to take effect; and

• When payments are applied if the consumer fails to provide notice of termination, for example full payment for a subsequent membership period.

Dr Schaper added “the ACCC understands that using the phrase ‘No Contracts’ may be an attempt by some gyms to distinguish their short-term membership offerings from gyms which offer long-term memberships.

“However, using the phrase does not provide consumers with clarity regarding this distinction.”

The ACCC has previously taken action on misleading conduct in the fitness industry:

2012 - Fitness club pays ACCC's first infringement notice for carbon claim - The ACCC believed that that the club did not have a reasonable basis for claiming the carbon price would increase the cost of gym memberships. 

2010 - Fitness First provides ACCC with undertaking - Fitness First's promotional flyers indicated the joining fee was a ‘gold coin’ and specified an administration fee payable on joining but failed to specify, in a prominent way and as a single figure, the single total price for the membership.

25th March 2014 - FITNESS AUSTRALIA RELEASES NATIONAL MEMBERSHIP CONTRACT TEMPLATE, APPOINTS NEW BOARD MEMBER 

22nd March 2014 - PAYSMART BACKS FITNESS AUSTRALIA MOVE FOR CORRECT WORDING IN FITNESS CLUB MEMBERSHIP CONTRACTS

10th January 2014 - ACCC WARNS FITNESS BUSINESSES ABOUT THE TERM 'NO CONTRACTS'

29th May 2013 - NSW FAIR TRADING COMMISSIONER REMINDS CONSUMERS OF GYM MEMBERSHIP RIGHTS AND RESPONSIBILITIES 

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