Consumer Council lodges formal complaint against Flash and Gain loyalty program with Commerce Commission

24/12/2009 10:39

The Consumer Council lodged formal complaint against MH’s Flash and Gain loyalty program to Commerce Commission yesterday to protect vulnerable consumers from a program which is rather

disloyal to its customers. Whilst MH claims that the Flash & Gain Loyalty program is a reward system for its customers for their loyalty and continuing patronage, it was admitted by MH that it is more of a moneymaking venture. If this is the case MH has misled their loyal customers by promoting it as a “loyalty program”.

MH has substantial market power with 28 supermarkets throughout Fiji. Being a dominant player MH is abusing its market power through a loyalty card program to weaken competition in the marketplace.

The loyalty program has several prejudicial terms as it restricts its loyal member’s rights and remedies. Consumers join the so called “loyalty programs” thinking that they are being rewarded for their loyalty and continuing patronage through huge discounts on their shopping and various rewards. However, what they don’t understand is that they are just further contributing to the huge profits- first by selling Flash and Gain for $10 and secondly the Flash and Gain card holders shopping in their stores thinking they are getting the best bargain.

MH has publicly stated that they have more than 100,000 members on this program (old statistics)  which simply means that MH collected more than $1 million by just selling the loyalty cards but it could be more. If MH sold 200,000 cards (inclusive of supplementary/lost cards) than it has collected $2 million.  Why should a consumer pay for being loyal? 

If this program was designed to reward the loyal customers than why is it that MH needs to sell the cards at a fee of $10 each. Other businesses also have similar loyalty programs (Tappoos, Jacks, Prouds) but their customers can acquire these loyalty cards free by shopping in their outlets for certain sum.  If these businesses can give out cards free then why is it that MH can not do likewise?

The Council has been monitoring MH Flash & Gain for sometime now and we believe that the system does not benefit the loyal customers as it promised. Our survey on savings and discounts offered on Flash Gain shows that other supermarkets offer better deals to customers without a loyalty program.  A customer can get a better deal  simply by comparison shopping rather than believing that he/she  received better deal through Flash and Gain card.

Furthermore, the Council would like to know what systems and processes MH has put in place to have the flash points from the participating outlets such as Singh’s Curry House, Vodafone, Damodar Village Six Cinemas etc to be recorded and added to the total points of the customer. Flash points gained at the participating outlets are recorded manually rather then swiped on the cash register machines. How can MH guarantee that flash points accumulated and recorded manually in these businesses are actually added in the main system at MH? Why MH is not issuing a statement to show how much  points were earned under Flash and Gain programme?

The Council has recently completed an analysis on the rewards given out by MH in lieu of the accumulated flash points and the analysis shoed that items given for rewards makes it very difficult for the member to get anything worthwhile based on the current dollar value per point. For example to get a 20g Bongo which normally costs $0.45 cents, Flash & Gain member has to accumulate 20 points by spending $100. Similarly, to get the reward- Akira 17 litres Microwave Oven costing $199.00, the Flash & Gain member has to earn 9000 points by spending $45,000 in a program that has an expiry date on the card. Is the rewards really worth the money spent to get it. If consumers do comparison shopping they will naturally save enough money to buy the rewards which is there to entice consumers.

Again the Council believes that increasing the dollar value per point just five months before the expiry of Flash & Gain is a clever technique used by MH not to let members accumulate enough points to redeem rewards but have some points which they would not want to lose and hence will be forced to purchase a new membership card which MH intends to introduce. The current members would be accumulating points but because of increased dollar value per point this maybe not enough to qualify for good gifts.

We also have great concerns on some clauses of the terms and conditions of Flash & Gain membership as the Council believes that it is unfair to customers and in breach of laws. One such clause is:

any point which are not used by a member to claim a reward will automatically expire on expiry of the membership card, unless the member purchases another membership card at the applicable price, in which case the unredeemed points will be transferred to the new membership card”.  

The Flash & Gain program is coming to an end this month (31 December 2009); however, to date MH has not issued a public statement or personal letters to its Flash & Gain members advising them of the expiry and informing these customers to redeem their points. Council believes that this clause is intentionally added by MH as bait to lure customers to join a new loyalty program should they introduce one after the expiration of Flash & Gain at a price.

The Council would like to inform consumers not to be overwhelmed by the marketing techniques and promotion of loyalty programs and the propaganda that it is a system to reward the loyal customers. In reality, loyalty programs such as Flash & Gain are money making schemes for business houses. Hence the consumers should not to be overwhelmed by the marketing tactics and promotion of loyalty programs which are sold at a price.