"The Australian Competition and Consumer Commission and Australian consumers have had enough of advertisements for premium mobile services that are, in the ACCC's view, misleading," Acting ACCC Chairman, Mr Peter Kell, said today.
"The ACCC issued warnings earlier this year to the industry: clean up your act or face the consequences. We've kept our word - we are taking action, as demonstrated by two recent ACCC initiated Federal Court actions."
The Federal Court has found that advertisements by AMV Holdings Limited, a company based in the United Kingdom, published in Dolly, Girlfriend and TV Hits magazines, were misleading.
"The busy layout of the advertisements appearing in youth magazines, combined with the inadequate and inappropriate use of fine print disclaimers, is misleading and in breach of the Trade Practices Act 1974," Mr Kell said.
"Of particular concern was that the advertising did not adequately disclose the nature of the services being offered and their costs. Consumers would unknowingly be subscribing to an ongoing and costly service rather than acquiring a one-off purchase of a particular ring-tone, wallpaper or game.
"Preying on unsuspecting consumers, especially youth, is simply unacceptable and will not be tolerated.
"The action against AMV demonstrates that no matter where a company is based, the ACCC will take action to protect Australian consumers."
In separate action this week, the Federal Court, at the request of the ACCC, ordered an interim injunction against Clarion Marketing Australia Pty Ltd which distributed millions of scratch cards in popular magazines including New Weekly, Zoo, and TV Week, and major newspapers.
The scratch cards have pictures of valuable prizes and a latex panel, which consumers scratch to reveal three matching symbols and a unique code. Consumers are prompted to SMS the code to a '19' number to claim a prize. After sending an SMS, consumers find they are subscribed to a premium SMS service at a cost of $10 every six days.
The injunction ordered by the court requires Clarion to send a free SMS by Friday 19 June 2009 to consumers who attempt to claim a prize, notifying them of the cost of the service and seeking their authorisation to continue prior to commencing the subscription.
The ACCC has filed proceedings in the Federal Court against Clarion seeking declarations that publishing the scratch cards was misleading and deceptive in breach of the Act, as well as an order that Clarion send an SMS to all subscribers notifying them of the outcome of the proceedings and directing them to contact their telecommunications provider.
"Mobile commerce, including premium SMS content, is a burgeoning market place. But misleading marketing is threatening to bring the reputation of the Australian telecommunications industry—including content providers, aggregators and telcos —into disrepute. Consumers are frustrated and have had enough of being duped by misleading advertisements for expensive mobile subscription services.
"The ACCC has acted swiftly and decisively in response to potentially misleading advertisements. Content providers considering new ways to market their services should consider this: the ACCC is closely monitoring SMS advertisements, and if you mislead consumers then you are subject to the full weight of the law.
"Content providers are not the only companies that are the subject of the ACCC's scrutiny. The Act also prohibits a corporation from being, in any way, directly or indirectly, knowingly concerned in the contravention. The ACCC will continue to monitor closely the actions of all parties involved in the premium mobile services business in response to concerns about potentially misleading advertisements."
The ACCC has also taken the following recent actions in response to premium mobile service advertisements:
- court enforceable undertakings from ACP Magazines and Pacific Magazines, publishers of youth magazines (including Dolly and Girlfriend) to improve the overall standard of advertising for mobile premium services
- court enforceable undertakings from TMG Asia Pacific for its 'Text and Win' services, and
- commenced legal proceedings in February 2009 against Teracomm Limited, a content provider based in Bulgaria.