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

Hong Kong authorities have arrested two directors of Physical Health Centre. As of September 15, a city watchdog had received nearly 4,000 complaints involving around HK$133.5 million (US$17.1 million) against the gym for failing to deliver prepaid services.

The Consumer Council said the biggest individual claim involved a contract that would only take effect in 2037. The deal involved payment for more than 1,900 private fitness classes and a 10-year membership amounting to HK$1.86 million.

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

The directors were arrested for allegedly violating the Trade Descriptions Ordinance by having no intention of supplying services after accepting customer payments. The offence is punishable by up to five years in prison and a HK$500,000 fine.

The government said earlier this month that an interdepartmental team would investigate the alleged crimes under the Trade Descriptions Ordinance. It would also see if the company committed any other crimes.

Several of the chain’s trainers have filed claims for unpaid wages, and rent has gone unpaid at some branches.

Politicians and experts have said that Hong Kong should better regulate the sale of prepaid services to protect consumers. Lawmaker Doreen Kong Yuk-foon noted numbers released by the council. The watchdog has received about 7,700 complaints about prepaid services over the past three years, amounting to around HK$200 million.

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

She also said Hong Kong’s consumer laws were not as strong as in other places. “We are very backward. If we do not act, it will affect the service industry, and consumers will lose confidence in the sector,” Kong explained.

Kelvin Kwok Hiu-fai is an associate professor at the faculty of law at the University of Hong Kong. He said the city needed to introduce a cooling-off period as proposed by the government in 2019.

The proposal applied to some fitness centres and beauty salons. It would call for a cooling-off period of up to seven working days, giving customers time to cancel a deal or contract.

Staff writers

Question prompts

1. What was the primary reason behind the arrests of two Physical gym directors?

(1) Violating labour laws by underpaying staff members.

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

(3) Allegedly accepting payments without intending to supply services.

(4) Engaging in dishonest advertising practices.

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

3. Should Hong Kong change its consumer protection laws for prepaid services? If so, how? Explain using the news and your own knowledge.

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

Question prompts

1. What is being shown in this picture? How is it related to the news?

2. How can Hong Kong authorities better protect consumers from falling victim to dishonest business practices? Explain using the news, photo and your own knowledge.

Glossary

Consumer Council: an organisation established by the Hong Kong government that seeks to protect consumer rights and warn people about unfair and dishonest business practices.

allegedly: accusations or things said without firm proof. In law and journalism, you must use the word “alleged” or “allegedly” when discussing a crime if the case hasn’t been brought to court and the person has yet to be found guilty of the crime.

cooling-off period: a period of time after buying something during which a person can cancel a purchase, return goods that have been supplied, and get a full refund.

Physical Fitness & Beauty has been the subject of nearly 4,000 complaints to the Consumer Council, with the claims involving more than HK$133 million. Photo: Sam Tsang

Sample answers

News

1. C
2. The biggest case involved a contract which would only take effect in 2037. The contract included more than 1,900 fitness classes and a 10-year membership amounting to HK$1.86 million. In response to the claims, the government set up an interdepartmental team to investigate the alleged offences under the Trade Descriptions Ordinance and whether there were other suspected crimes.
3. Yes, I think that Hong Kong should amend its consumer protection laws regarding prepaid services. Many people are out a lot of money thanks to Physical. The company was knowingly scamming customers before its closure, as the chain was still selling prepaid services despite knowing they would not be able to provide them. (accept all reasonable answers)

Photo

1. A former customer at Physical gym shows his contract, which lists prepaid services that will not take effect 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. Authorities in Hong Kong could enhance consumer protection by enforcing stricter regulations on the terms and durations of prepaid contracts, conducting regular inspections of businesses offering such services, and providing clearer guidelines and information to educate consumers about their rights and potential risks associated with long-term contracts. (accept all reasonable answers)