New usage alerts are the latest consumer protection measures in the telecommunications sector, and with increased regulator activity you should ensure your advertising, sales and customer service practices comply.
New measures designed to prevent "bill shock" for post-paid mobile phone customers came into effect on 1 September 2013. Telecommunications service providers are now required to notify consumers when their included value allowance for SMS, voice and data services reaches 50, 85 and 100 per cent.
The "bill shock" protections are contained in the Telecommunications Consumer Protections Code 2012 (TCP Code) which provides a comprehensive set of rules designed to protect consumers and clearly spell out the obligations of retail telecommunications service providers.
Consumer protection in the telecommunications sector has been a recent focus of the ACMA and is a current enforcement priority for the ACCC. If your business sells telecommunications products/services to consumers, now is the time to double check your advertising and sales practices comply with the TCP Code and the Australian Consumer Law. Significant penalties apply to businesses who fail to meet their obligations under the TCP Code and/or ACL.
The TCP Code
The TCP Code was introduced on 1 September 2012 and contains specific requirements around advertising, sales practices, customer contracts, billing, changing service providers and complaint handling. The anti "bill shock" usage notification regime had a delayed start date which provided a transition period for the industry to update its systems and procedures.
The TCP Code is a mandatory industry code under the Telecommunications Act 1997 (Cth) and applies to service providers who supply telecommunications products to residential and some small businesses customers.
The TCP Code represents a significant development in consumer protection in the telecommunications sector. It was prepared by the telecommunications industry in consultation with the ACMA and other stakeholders in accordance with the regulatory framework under Part 6 of the Telecommunications Act.
Spend management alerts
The anti "bill shock" measures are contained in clause 6.5.2 of the TCP Code and require service providers to issue usage notifications to customers with post-paid phone or data plans with an included allowance.
The key features of the usage notification regime include:
- Purpose: usage notifications are a transparency measure designed to warn consumers before they exceed their included allowance and incur excess charges. This has been a hot issue in recent years, particularly in relation to excess data charges as smartphone take-up has grown rapidly.
- Usage notifications: service providers are required to provide an electronic notification (SMS or email) no later than 48 hours after the customer has reached a prescribed usage threshold. The notification must contain certain warnings and specify the charges (or contain a link to them) which will apply once the customer exceeds the included value.
- Usage thresholds: usage notifications must be issued once the customer reaches 50, 80 and 100 percent of their included allowance for national calls, SMS and data usage in Australia.
- Customised alerts: customers can opt out of receiving the usage notifications and service providers may offer different notification options (provided the customer consents).
- Smaller service providers: the usage notification requirements took effect on 1 September 2013, however smaller providers (less than 100,000 services) have another 12 months until they must provide non-data (SMS, voice) expenditure notifications.
- Exceptions: some limited exceptions apply to plans with "unlimited" usage, hard caps, "shaped" data or plans which were launched before 1 March 2012.
Additional transparency measures
The TCP Code provisions which have been in effect for 12 months already require a number of additional transparency measures which are designed to help consumers understand plan inclusions and charges which apply:
- Critical Information Summary: each service provider must prepare a two page "Critical Information Summary" for current pre-paid and post-paid plans which must be made available on its website and in store.
- Unit pricing in advertisements: service providers must prominently disclose the cost of making a two-minute standard national call, sending a standard SMS and using 1MB of data within Australia in advertisements containing post-paid plan pricing.
- Truth in advertising: the TCP Code contains some prescriptive advertising requirements concerning the use of headline representations, disclaimers, displaying the single price and using terms such as "unlimited", "free", "cap", "no exceptions", "no exclusions" or "no catches".
TCP Code compliance
Service providers are required to submit an annual Customer Information Compliance Statement and Compliance Attestation to Communications Compliance Ltd (CommCom), the independent TCP Code compliance monitoring body. Larger service providers (with more than 100,000 services) must also provide a Statement of Independent Assessment prepared by an external assessor.
The ACMA is focused on TCP Code compliance and has issued warnings to several telecommunications service providers. ACMA has entered into a Memorandum of Understanding with CommCom detailing how the two organisations will cooperate to enforce the TCP Code. Penalties for non-compliance include infringement notices and pecuniary penalties of up to $250,000 per contravention.
Interaction with the Australian Consumer Law
The TCP Code applies in addition to a service provider's obligations under the Australian Consumer Law (ACL), particularly in relation to advertising and sales practices.
The ACCC has expressed concerns about advertising and sales practices in the telecommunications sector for some time. A number of the advertising requirements in the TCP Code mirror the "truth in advertising" commitments given by the three mobile network operators in Australia in 2009. These commitments are recorded in the enforceable undertaking given to the ACCC by Telstra, Optus and Vodafone under section 87B of the Competition and Consumer Act 2010.
- prohibits misleading and deceptive conduct;
- prohibits unfair consumer contracts and unconscionable conduct;
- imposes restrictions around the use of component pricing;
- regulates telemarketing and over-the-phone sales initiated by the service provider; and
- contains non-excludable statutory consumer guarantees which apply to defective goods and services (eg. mobile phones, tablets, modems).
Serious consequences apply for breaches of the ACL, including infringement notices and pecuniary penalties of up to $1.1 million per contravention. The ACCC has taken action against a number of service providers in recent years including TPG Internet, Dodo, iiNet and NetSpeed Internet Communications.
The strong focus by the ACMA and the ACCC on business practices in the telecommunications sector reinforces the need for a strong compliance and ad clearance program addressing matters under the TCP Code and the ACL.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.