ACCC v Telstra
Australian Competition and Consumer Commission v Telstra Corporation Limited
[2021] FCA 502
Federal Court of Australia
Case details
Court
Federal Court of Australia
Citations
[2021] FCA 502
Judges
Justice Mortimer
Issues
Statutory unconscionable conduct
Australian Consumer Law
Penalties (agreed penalties)
Overview
The ACCC brought action against Telstra alleging contravention of s 21 of the Australian Consumer Law (unconscionable conduct). Telstra admitted the contravention and the ACCC and Telstra jointly submitted proposed orders, including a pecuniary penalty of $50m. The proposed orders were accepted by the Court.
The relevant conduct occurred between 2016 and 2018 and involved staff at certain Telstra Licenced Stores entering into contracts on behalf of Telstra for supply of goods or services to 108 identified Indigenous Australian Consumers. Many were from regional and remote communities and they were subjected to exploitative practices. The characteristics of the consumers and the relevant conduct was described in paragraph 1 of the judgment as follows:
(b) The Affected Consumers possessed one or more of the following characteristics:
(i) many spoke English as a second, third or fourth language;
(ii) many had difficulties with reading, writing and understanding financial concepts and had limited or no ability to read or comprehend the terms of Telstra’s written contracts that they would be bound by and other documentation related to the transaction which, for these consumers, was confusing and difficult to understand; and
(iii) many were unemployed and relied on government benefits or pensions as the primary source of their limited income.
(c) When entering the Affected Consumers into contracts for post-paid mobile products and services, TLS sales staff:
(i) entered the Affected Consumers into more than one contract for post-paid mobile products and services on a single day;
(ii) in some instances, having regard to the specific circumstances of the Affected Consumers, engaged in unfair tactics by not giving full and proper explanation of matters such as:
A. the terms of the contracts, including the way in which data usage was charged;
B. the nature and monthly base costs of the contract;
C. the consumer’s total minimum monthly liability for all post-paid products and services; and
D. the risk of incurring potentially unlimited excess data charges under the contracts;
(iii) in some instances, falsely represented or created the false or misleading impression that consumers could or would receive a device or devices for “free”;
(iv) in many instances, manipulated credit assessments, so as to be able to enter into post-paid contracts with consumers who would otherwise have failed Telstra’s credit assessment process and not have been approved for credit;
(v) in some instances, sold consumers extra add ons that they did not want or that sales staff falsely represented would be “free”, or would provide benefits to customers they could not otherwise obtain, when some of those benefits were otherwise available free of charge;
(vi) having regard to the specific circumstances of the Affected Consumers, did not take adequate steps to determine whether the cost of the post-paid mobile products and services were affordable for the particular consumer, including when sales staff were aware the consumer was unemployed or receiving a government benefit or pension;
(vii) exploited the consumer’s lack of understanding of the terms applying to the transaction and/or took advantage of a cultural propensity for Indigenous Australian people to express agreement as a means of avoiding conflict,
(collectively referred to as the Improper Sales Practices).
(d) The conduct of the TLS sales staff referred to in paragraphs 1(a) and 1(c) above is taken to have been engaged by Telstra pursuant to s 139B(2) of the Competition and Consumer Act 2010 (Cth) (CCA), and Telstra, by virtue of that conduct, thereby engaged in trade or commerce, in conduct in relation to each of the Affected Consumers that was, in all the circumstances, unconscionable in breach of s 21 of the Australian Consumer Law (ACL), which is contained in Schedule 2 to the CCA, the occurrence and impact of which was all the more serious as a result of the matters set out in paragraphs 1(e) and 1(f) below.
(e) The Improper Sales Practices took place in circumstances where, during the Relevant Period, Telstra was aware of:
(i) the unique cultural needs of, and issues faced by, many Indigenous Australian people;
(ii) various aspects of the Improper Sales Practices that had occurred, and reoccurred, in the Relevant Stores from the ongoing reports of such conduct received through various channels, including its own Credit Risk Office;
(iii) the risk of some Indigenous Australian consumers incurring significant charges from excess data charges, within a short time period, including due to how devices were used and shared within some Indigenous Australian communities, which meant that large excess data charges could be incurred over a short period of time without adequate warning upfront of the costs involved for the account holder; and
(iv) the possible impact that any sales staff incentives paid by the licensees of the Relevant Stores to their sales staff could have had in positively encouraging Improper Sales Practices.
(f) Despite knowledge of the matters in paragraph 1(e), Telstra did not, during the Relevant Period:
(i) have, or implement, effective systems or processes to ensure that the risk and magnitude of additional significant excess usage fees if customers exceeded the included usage allowances of a post-paid contract for mobile services was explained fully and properly to Affected Consumers at the Relevant Stores;
(ii) take effective steps to ensure that TLS sales staff identified the products or the services most suited to the Affected Consumers’ means and circumstances;
(iii) have, or implement, effective systems or processes that would have prevented the Affected Consumers from being sold inappropriate and unaffordable post-paid products and services without understanding what they were signing up for, the base cost of those contracts and potential excess data charges;
(iv) have, or implement, effective systems and processes to detect and prevent TLS sales staff engaging in credit assessment manipulation;
(v) change its processes for referring or selling debts of consumers who had purchased products and services from the Relevant Stores to third party debt collectors, who pursued many of the Affected Consumers for the debt they owed to Telstra;
(vi) offer Indigenous Australian cultural awareness training to sales staff until May 2017, did not adequately focus such training on how sales staff may need to adjust the way they engaged with Indigenous Australian consumers in a sales environment and, in any case, did not require all sales staff, including those at the Relevant Stores, to undertake the Indigenous Australian cultural awareness training;
(vii) have, or implement, effective systems or processes to provide assistance to Indigenous Australian consumers who did not speak English as a first language or who had limited financial or literacy skills to understand the contracts for the post-paid mobile products and services; and
(viii) have in place, or implement, an effective remediation program to respond comprehensively to complaints made by or on behalf of the Affected Consumers.
The Court ordered:
2. Pursuant to s 224(1)(a)(i) of the ACL, within 30 days of the date of this Order, the Respondent pay to the Commonwealth of Australia a pecuniary penalty in the sum of $50 million.
3. The Respondent pay the Applicant’s costs of and incidental to the proceeding.
4. A copy of the reasons for judgment, with the seal of the Court affixed thereon, be retained on the Court file for the purposes of s 137H(3) of the CCA.
Catchwords
CONSUMER LAW – admitted contraventions of s 21 of Australian Consumer Law – whether agreed pecuniary penalty appropriate having regard to all relevant circumstances – consideration of relevant matters in determining amount of pecuniary penalty – declaratory relief and penalties awarded in terms sought by parties pursuant to s 244 of the ACL