Home » Consumer Law Update: Telstra fined $50M for unconscionable conduct

Consumer Law Update: Telstra fined $50M for unconscionable conduct

Posted by Colin Miller | 01 June 2021 | Corporate Finance

In a landmark decision, the Australian Federal Court has imposed  the second largest penalty ever under Australia’s Consumer Law on Telstra for unconscionable conduct[1].

 

Why is this important for Australian Businesses?

As noted in the Briefing Note 8 May 2021, the Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC) will continue to be diligent in enforcement action against businesses which engage in unconscionable conduct.

The ACCC statement in relation to the Telstra proceedings confirmed that the Australian Federal Court on 13 May 2021 has ordered Telstra pay $50 million in penalties for engaging in unconscionable conduct when it sold mobile contracts to more than 100 Indigenous consumers across three states and territories. The proceedings followed an 18-month investigation by the ACCC.

Background

Telstra admitted that between January 2016 and August 2018, it breached the Australian Consumer Law and acted unconscionably when sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple post-paid mobile contracts which they did not understand and could not afford.

“Sales staff in these Telstra-branded stores used unconscionable practices to sell products to dozens of Indigenous customers who, in many cases, spoke English as a second or third language,” ACCC Chair Rod Sims said, “This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”

Size of penalty and remediation

The ACCC also pointed out that the $50 million penalty imposed against Telstra is the second highest penalty ever imposed under the Australian Consumer Law.

Mr Sims noted that the scale of the penalty was appropriate given the nature of the behaviour by Australia’s biggest telecommunications company, which was “truly beyond conscience”.

Telstra also agreed to institute a number of changes to its business practices including:

  • Telstra undertakes to provide remediation to affected consumers.
  • improve its existing compliance program,
  • review and expand its Indigenous telephone hotline.
  • , and enhance its digital literacy program for consumers in certain remote areas.

The $50 million penalty is vastly more than the economic benefit which Telstra derived from the unconscionable conduct. It is estimated that the total debt incurred by the 108 affected customers amounted to just under A$800,000.

Key takeaways and actions to consider

  • The ACCC has demonstrated it will pursue cases of unconscionable conduct.
  • In this instance there were clear customer vulnerabilities which Telstra took advantage of.
  • Businesses must be diligent in ensuring conduct with customers does not leave them open to a claim of unconscionable conduct. The definition of ‘unconscionable conduct’ includes taking advantage of specific vulnerabilities.
  • Further, and as noted in Briefing Note 8 May 2021, it is likely that a Court will not have find any particular vulnerabilities to conclude that unconscionable conduct has taken place. The financial penalty may be multiples of any economic benefit derived from the conduct.

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[1] ACCC v Telstra [2021] FCA 502 (13 May 2021)

Resources:

For more information on the Australian Consumer Law or this update, please contact Nexus Group Principal Colin Miller on cam@nexuslawyers.com.au

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 This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues. 

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