The Australian Competition and Consumer Commission has sent a clear message to telephone companies that they need to clean up their sales and marketing methods following Federal Court action against two major telecommunications companies.
The ACCC’s investigations into the selling practices of One.Tel and Primus were settled today with each company agreeing to pay $500,000 toward a public awareness campaign aimed at stamping out unauthorised customer transfers, a practice known in the industry as ‘slamming’.
"The activities that were the subject of the ACCC’s Federal Court action included misleading and deceptive conduct, unconscionable conduct in taking unfair advantage of consumers with disabilities and the elderly", ACCC Chairman, Professor Allan Fels, said. "In particular, it was the agents acting on behalf of telecommunications companies One.Tel and Primus that engaged in the conduct. These selling practices occurred across Australia and evidence a systemic problem with slamming in the telecommunications industry.
Whilst acknowledging that the door to door sellers and telemarketing agencies were directly involved in gaining new customers, it was nevertheless the responsibility of the telecommunications companies to ensure their representatives were adequately supervised to avoid liability under the Trade Practices Act 1974. Both One.Tel and Primus have indicated to the ACCC that they will no longer use door-to-door selling methods.
"The consumer protection provisions of the Trade Practices Act are clearly directed at protecting consumers from this type of conduct. The telecommunications industry specifically and industry more broadly should take this court action as a unequivocal signal that only way to gain customers is through lawful marketing and with the full and informed consent of the consumer".
The ACCC case showed that agents used by One.Tel and Primus at times obtained customers, including consumers with limited understanding of English. The door-to-door sellers also gained signatures of consumers that clearly could not ascertain the effect or meaning of what they were signing. The pattern of this conduct extended to taking unfair advantage of elderly and infirm members of the community.
"The ACCC’s investigations and the records of the phone companies clearly show that the illegal activities of the door-to-door and telephone sales agents occurred within weeks of them being contracted by One.Tel and Primus. Despite the continuation of the clearly unacceptable level of complaints, the companies only recently stopped the use of the agents.
"It was the actions of the ACCC that had opened up competition for local call customers and the benefits of this can be seen in the significant reduction in local call charges over the past 12 months. Indeed Primus and One.Tel have vigorously contributed to and been at the forefront of competition in these markets. However competition for residential customers in particular, must be conducted by adhering to lawful selling practices".
Professor Fels also said that the investigation by the ACCC of the agents involved was ongoing.
"It is not just in the telecommunications industry that slamming occurs and not just through door-to-door selling. For instance, as contestability for retail gas and electricity consumers becomes available, the incentives for companies to engage in unscrupulous practices may rise. But customers must only be won through compliance with the Act.
"The loss of public confidence in the methods employed by service providers to gain customers damages competition. Reluctance on the part of consumers to take up cheaper or more innovative product offerings hinders the benefits that effective competition brings".
The ACCC commenced its investigations in the middle of this year following a proliferation of complaints to the Telecommunications Industry Ombudsman from consumers throughout Australia. The vast majority of complaints concerned the transfer of telephone services by the agents to either One.Tel or Primus without the consent or sometimes even the knowledge of the account holder.
The ACCC obtained orders by consent in the Federal Court against One.Tel and Primus. The injunctions include that One.Tel and Primus are restrained from:
- engaging in misleading and deceptive conduct
- fraudulently obtaining signatures or consent over the telephone
- coercing or harassing potential customers in transferring their phone services; and/or
- failing to notify consumers of applicable cooling-off periods.
One.Tel and Primus have also given undertakings to the ACCC that they will:
- write to all affected customers and provide compensation in cases where it can be shown that the customer had been slammed
- engage an independent assessor to undertake a review of business practices, including marketing methods and complaint handling arrangements
- adopt all relevant industry codes; and
- pay the ACCC's legal costs in the proceedings.
The ACCC acknowledges the cooperation of both One.Tel and Primus in assisting the ACCC to resolve the matter expeditiously and in taking steps to prevent further incidences of slamming.
Professor Fels also acknowledged the crucial role of the TIO in assisting the Commission with its investigations.