Statement regarding Macquarie Equipment Rentals and Four Corners

Macquarie Group Limited strongly objects to the depiction of our company in an ABC TV Four Corners program screened on 1 November 2010.  The program alleged false and misleading behaviour by telco salespeople and complicity by finance companies.

Despite promoting the program with Macquarie’s name, screen shots of our logo and building, few specific allegations were made about Macquarie Equipment Rentals (“MER”).  Further, Four Corners’ construction and presentation of the program created a false impression that the story was overwhelmingly about Macquarie when it was not.  

The program in our view deliberately sought to damage Macquarie’s reputation.  We will be requesting a formal review of this program be undertaken by the ABC with regard to its impartiality.

We respond to the limited number of direct allegations made about MER following our internal review:

Facts

• Australia has a $14bn per annum equipment finance market.  Many types of equipment (including office and telco equipment) are financed by a large range of financiers. A portion of this finance is arranged by brokers acting on behalf of their customers.
• MER operates in this market providing equipment rentals to approximately 19,000 small business customers.
• MER does not employ a direct-to-customer sales force.  
• MER’s business model is to accept business introduced by finance brokers.  
• Finance brokers work for their customers and equipment suppliers to obtain the finance to acquire equipment selected by the customer for their business needs.  The finance broker, on behalf of the customer, would usually attempt to obtain multiple competitive bids from financiers.
• On all occasions in which MER is selected by a customer or its broker, MER requires a separate rental agreement which clearly states the lease terms and conditions and identifies the lessor as MER or its authorised representative.  All customers are subject to a credit assessment process by MER.
• In most cases MER confirms with the lessee that they:
  • have received the equipment that they selected
  • are satisfied with the condition of that equipment
  • have read and understood the separate rental agreement
• By 2007, telco equipment rentals represented approximately one fifth of MER’s portfolio.  Over the next two years, a number of telco providers ceased to operate affecting some of our customers.  Most have found other telco service providers and continue to be customers of MER.  Of the remaining lessees who repudiated their rental agreements, most of these claims have been resolved as a result of a case by case review. Only approximately 50 remain in dispute and we have been and continue to actively seek to resolve those matters.
• In arriving at a settlement with a customer, MER performs a careful case by case review including taking into account the customer’s particular circumstances. MER has shared the losses with its customers by incurring write downs.
• MER actively seeks reasonable and mutually agreeable resolutions for all outstanding repudiated rental agreements and will continue to do so.

Fresh Telecoms

The Four Corners program focussed on what it insinuated was MER’s improper relationship with Fresh Telecoms.

• This is not supported by the facts. All requests to rent equipment supplied by Fresh Telecoms came to MER through a finance broker in the normal course of business.  MER did not directly market to customers and therefore could not have been party to any misrepresentations to customers.
• The finance broker also introduced business from Fresh Telecoms to a number of other financiers.
• The transaction discussed by Four Corners was where MER was chosen by the customer and its broker to be the lessor of the equipment. In this regard:
  • the customer selected the equipment
  • the customer signed in multiple places a clearly marked and separate rental agreement with MER
  • MER paid the full invoiced price of the selected equipment in good faith to Fresh Telecoms, the supplier of the equipment
• MER had no knowledge of any alleged misrepresentation in respect of its rental agreements.       

A lessee alleged that the actual value of goods was worth significantly less than they were charged.

• MER paid in good faith the invoiced amount for equipment selected by the lessee and without any mark-up on top.
• Having reviewed the description of items selected by that lessee and given MER’s experience with similar assets, it is MER’s assessment that the invoiced amount was a reasonable price.
• In alleging the equipment was worth less than they were charged the lessee may not have taken into account that:
  • The price of all telco equipment falls materially over time; and
  • Retail prices of telco equipment depend on many factors including: the manufacturer, specifications, configuration, capacity, installation costs and scope of warranties as selected by the lessee

Four Corners claimed 170 customers had taken action in the Federal Court against MER

• Two actions against MER involving 13 lessees were commenced in the Federal Court and these matters are currently in mediation.

Other

We were surprised by the implication that Macquarie had not been fully responsive to the ACCC.  We have and will always fully cooperate with all regulators.

In April of this year, we were contacted by the ACCC and asked to:

1. Carefully consider any future involvement in rental agreements that form part of bundled telecommunications deals; and
2. Review MER’s continued reliance upon contracts of this nature for the recovery of monies.

We understand that a number of other financiers were also contacted.

We subsequently advised the ACCC that:

1. We ceased to accept applications from prospective clients for new rental agreements in connection with equipment to be supplied by telco service providers on or about December 2007.
2. In every case where MER seeks to recover on a rental agreement, MER has taken and will continue to take a principled, careful and case-specific approach in assessing each disputed rental agreement on its individual merits.
3. We would be pleased to meet to discuss any remaining ACCC concerns.

In a letter dated 28 June 2010, the ACCC advised that the process of considering the additional information MER had provided had taken longer than envisaged; the ACCC expected to complete the task by the end of July 2010 and would then contact Macquarie to arrange a mutually convenient time for a meeting to occur.  No meeting had been requested at the time the program went to air.

MER continues to actively seek resolution of all leases repudiated due to the failure of telco service providers on a fair and reasonable basis taking in to account the nature of the claim.