Spark Deep Dive: Hong Kong Physical gym closure leads to two arrests for unfair practices – YP

Hong Kong authorities have arrested two directors of the physical health center. As of September 15, a city watchdog had received nearly 4,000 complaints worth about HK$133.5 million (US$17.1 million) against the health center for failure to provide prepaid services.

The Consumer Council said the largest individual claim related to a contract that would not come into effect until 2037. The deal involved paying for more than 1,900 private fitness classes and a 10-year membership worth HK$1.86 million.

Luk Ngai-keung was taken into custody after turning himself in at customs. His wife, Ho Yuk-wah, was arrested after police officers went to her home Wednesday morning. A citywide search was conducted for others involved in the case.

The directors were arrested for allegedly violating the Business Descriptions Ordinance by failing to provide services after accepting payment from customers. The offence carries a penalty of up to five years in prison and a fine of HKD500,000.

The government announced earlier this month that an inter-ministerial team would investigate the alleged offences under the Business Descriptions Ordinance. It would also look into whether the company committed any other offences.

Several coaches in the chain have filed claims for unpaid wages and rent has not been paid in some branches.

Hong Kong should better regulate the sale of prepaid services to protect consumers, politicians and experts say. Lawmaker Doreen Kong Yuk-foon cited figures released by the council. The watchdog has received about 7,700 complaints about prepaid services over the past three years, amounting to about HK$200 million.

She argued that the protection provided by the Trade Descriptions Ordinance did not protect consumers’ rights to prepaid services.

She also said Hong Kong’s consumer protection laws were not as strict as in other countries. “We are way behind. If we don’t take action, it will affect the service sector and consumers will lose confidence in the sector,” Kong said.

Kelvin Kwok Hiu-fai is an associate professor at the University of Hong Kong’s Faculty of Law. He says the city should introduce a cooling-off period as proposed by the government in 2019.

The proposal applies to some fitness centres and beauty salons and provides for a cooling-off period of up to seven working days, giving customers time to cancel an offer or contract.

Permanent editors

Questions and answers

1. What was the main reason behind the arrest of two Physical gym directors?

(1) Violation of labor laws by underpaying staff members.

(2) Ignoring health and safety rules in their gyms.

(3) Purportedly accepting payments without the intention of providing services.

(4) Engage in dishonest advertising practices.

2. Name ONE key case against the gym chain revealed by the Consumer Council and ONE action taken by the authorities in response to these allegations.

3. Should Hong Kong amend its consumer protection laws for prepaid services? If so, how? Explain based on current events and your own knowledge.

Physical Fitness customer Chui Kee-lap shows his contract, which states an expiration date of 2031. Photo: Sam Tsang

Questions and answers

1. What does this image show? How does it relate to current events?

2. How can Hong Kong authorities better protect consumers from dishonest business practices? Explain using information, photos and your own knowledge.

Glossary

Consumer advice: an organization established by the Hong Kong government that seeks to protect consumer rights and warn people against unfair and dishonest business practices.

allegedly: accusations or statements made without solid evidence. In law and journalism, you must use the word “alleged” or “allegedly” when talking about a crime if the case has not been brought to court and the person has not yet been convicted of the crime.

Cooling-off period: a period of time after purchasing something during which a person can cancel a purchase, return the goods that were supplied and obtain a full refund.

The fitness and beauty sector has been the subject of nearly 4,000 complaints to the Consumer Council, with claims involving more than HK$133 million. Photo: Sam Tsang

Examples of answers

News

1. C
2. The most serious case involved a contract that would not come into effect until 2037. The contract provided for more than 1,900 fitness classes and a 10-year membership worth HK$1.86 million. In response to these allegations, the government set up an inter-ministerial team to investigate alleged breaches of the Business Descriptions Ordinance and determine whether other offences were suspected.
3. Yes, I think Hong Kong should change its consumer protection laws regarding prepaid services. Many people have lost a lot of money because of Physical. The company was knowingly defrauding its customers before it closed down because the chain continued to sell prepaid services even though it knew it would not be able to provide them. (accept all reasonable answers)

Photo

1. A former Physical gym customer shows his contract, which lists prepaid services that won’t kick in until 2027 and expire in 2031. This is relevant to the recent news that Physical was selling prepaid services to customers when they knew they couldn’t provide them.
2. Hong Kong authorities could strengthen consumer protection by enforcing stricter regulations on the terms and duration of prepaid contracts, conducting regular inspections of businesses offering such services, and providing clearer guidelines and information to inform consumers of their rights and the potential risks associated with long-term contracts. (accept all reasonable answers)