Canberra based firm, Custom Security Services, has provided court enforceable undertakings offering refunds and full disclosure to some of its customers following an Australian Competition and Consumer Commission investigation.
Numerous complaints were made to the ACCC and the ACT Office of Fair Trading by CSS customers who were charged for security system upgrades which were undertaken without prior consultation in early 2001. In most cases customers became aware of the upgrade only when they received an invoice for $99.
"Businesses need to provide adequate and accurate information to their customers to allow them to make informed choices, failure to do so may breach the Trade Practices Act 1974", ACCC Chairman, Professor Allan Fels, said today.
While CSS subsequently sent letters to its customers explaining the upgrade, the letters failed to disclose the full cost of the upgrade. The modifications to security systems, which commenced in March 2001, provided an arming and disarming reporting capacity that necessitated daily testing and resulted in significant increases to ongoing telephone charges.
CSS’s attempts to explain the upgrade to its customers also contained representations that the ACCC alleged were misleading. In particular, CSS stated that the changes were “necessary upgrades” required because of an Australian Standard and suggested that customers risked having insurance claims denied. The ACCC's concerns were:
- the failure to disclose the non-mandatory nature of the relevant Australian Standard
- misleading statements about the need for the upgrade
- the implication that customers may have been mislead in respect of their rights to make insurance claims.
CSS has acknowledged that its failure to properly inform customers prior to the upgrade was in breach of s.52, s.53(e), s.53(f), s.53(g) and s.64 of the Trade Practices Act 1974. As part of the court-enforceable undertakings, CSS has agreed to:
- immediately cease making demands for payment for security system upgrades
- write to customers (whose security system did not previously have facilities for opening and closing reports) offering refunds of the $99 upgrade fee and increased telephone charges
- fully disclose relevant information to enable customers to make an informed choice
- implement a trade practices compliance program.
"Business should be warned, misleading conduct in breach of the Act could risk fines of up to $1.1 million for companies, or $220,000 for an individual", Professor Fels said.