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Wednesday, 18 May 2011 12:08

Optus pays $178k penalties to ACCC for misleading advertising - UPDATED

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Rather than having to take Optus to court the ACCC has used the new consumer protection laws to hit Optus with 27 penalties totalling $178,200 for making false and misleading representations in its advertisements for its 'Max Cap' plans. Optus says it eleccted to pay the fines, without admitting guilt, rather than contest the matter in court.

Amendments to the Trade Practices Act that came into force in April 2010 enable the ACCC to impose the penalties on the basis of its own judgement of the offending conduct. Previously it would have had to have a court rule on allegations of false and misleading conduct.

This is only the second time that the ACCC has used its new powers against a telco for false and misleading advertising. In December the ACCC issued four infringement notices to Dodo for making false or misleading representations about the price of its services in advertising its Unlimited ADSL2+ broadband plan. Dodo paid $26,000 in penalties.

In the case of Optus, the ACCC issued 27 notices, each carrying a penalty of $6,600 on the basis that it "had reasonable grounds to believe Optus made false or misleading representations about the price of its services and engaged in conduct that was likely to mislead consumers about the nature and characteristics of its services."

Despite being Australia's second largest telco Optus (a SingTel subsidiary) got off lightly. Charged with the same offence Telstra, and many much smaller telcos, could have been hit for almost $2m. According to the ACCC's web site, "The penalty amount in an infringement notice will vary depending on the alleged contravention, but in most cases is fixed at $6600 for a corporation (or $66,000 for a listed corporation) and $1320 for an individual for each alleged contravention."

Throughout July and August 2010, Optus conducted a promotional campaign in which it advertised its 'Max Cap' plans in various print and online advertisements. The ACCC said that, in its view "these advertisements gave the impression that a consumer could purchase these cap plans and expect to pay a maximum specified amount per month, when in fact the specified amount was the minimum the consumer would pay each month'¦In addition, a number of these advertisements gave the impression that the consumer could use their call credit to call 'anyone', when in fact only certain call types were included.

Optus disagees, sayiing it does not believe the use of the term 'Max Cap' was misleading, and says it changed the name after the ACCC expressed its concerns. In a statement Optus said: "The 'Max Cap' plans offered customers significantly more value than previous plans and were developed in response to customer desire for a plan that provided maximum-included value, coupled with ease-of-use." (The ACCC does not appear to have disputed any of these claims).

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The ACCC decided it was appropriate to issue 27 infringement notices to Optus based on the number of advertisements published and the various representations made within those advertisements.

In April 2010, a range of consumer protection and fair trading reforms came into effect as part of the move towards a single national law, the Australian Consumer Law. At the time Optus and Dodo's infringements occurred these new provisions were part of the Trade Practices Act, but it was renamed Competition and Consumer Act 2010 on 1 January 2011.

The new rules enable the ACCC to use infringement, substantiation and public warning notices as an alternative to legal proceedings when dealing with potential contraventions of the Act.

In addition to facing an ACCC-imposed financial penalty, businesses also face reputational damage from having their name listed on the ACCC's website in the Infringement Notice Register or the Public Warning Register.

The ACCC can issue infringement notices for: unconscionable conduct; certain unfair practices; pyramid selling; certain product safety and product information provisions; failure to respond to a substantiation notice; provision of false or misleading information in response to a substantiation notice.

 

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