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Health and fitness operators and the OFT investigation into unfair terms

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01/11/2013

The Office of Fair Trading has concluded its investigation into the membership terms of health and fitness operators. The investigation cast a spotlight on unfair terms in consumer contracts and unfair trading practices.

In August 2011, the OFT secured an enforcement order in the High Court preventing Ashbourne Management Services Limited, a gym management company, and its directors from recommending, using or relying on certain unfair contract terms, which breached the Unfair Terms in Consumer Contracts Regulations 1999, and prohibiting a number of its debt collection practices, which breached the Consumer Protection from Unfair Trading Regulations 2008.

Ashbourne’s offending terms imposed minimum membership periods on members and early termination charges which required members who terminated early to pay all subscription fees payable over the entirety of the minimum membership period with no, or minimal discount for accelerated payment. Ashbourne’s practice of registering members with credit reference agencies as defaulters, even when those members were genuinely disputing payments, was held by the High Court to be unfair and contravened the Consumer Protection from Unfair Trading Regulations 2008. [1]

Subsequent to that ruling the OFT put all health and fitness operators on notice that they should check their terms, particularly those seeking to impose minimum contract terms and early termination charges on consumers, to ensure they were compliant. This was followed by an OFT investigation, opened in January 2012, into health and fitness club membership contracts, focusing on a number of providers.

The OFT has now reported that:

  • Dave Whelan Sports Limited and Harlands Group Limited have worked constructively with the OFT to improve their terms and conditions and associated documents and sales processes and signed undertakings to address the OFT’s concerns
  • LA Leisure Limited has also worked constructively with the OFT and signed undertakings which address most of the OFT’s concerns, although the OFT has reserved its position on the company’s continued use of contracts with minimum terms in excess of 12 months
  • the OFT closed its investigation into Bannatyne’s Fitness Limited, David Lloyd Leisure Limited and Fitness First Clubs Limited in March this year, after those companies signed undertakings to address the OFT’s concerns
  • the OFT closed its investigation into Virgin Active Limited in April 2012 after the company made some amendments to its standard terms and debt collection letters.

The undertakings accepted by the OFT included undertakings to explain key terms and membership features in the sales process, including by the use of “product presenter” and “key points” documents – something which will also be relevant to organisations operating in other sectors. Otherwise, the undertakings secured by the OFT largely reflect its 2002 Guidance on unfair terms in health and fitness club agreements.

[1] [2011] EWHC 1237