Australia: Telcos behaving badly: Regulators dial up the pressure

Last Updated: 17 April 2017
Article by Dan Pearce and Emily Booth
Most Read Contributor in Australia, August 2017

In March 2017, the Federal Court issued various sanctions against Sole Net and Sure Telecom and the ACMA directed Airlan to comply with an ombudsman's decision, and announced it had directed Total Group Pty Ltd and Direct Connect Pty Ltd to comply with the industry code.

The actions showcase the various regulators and arbitrators involved in the telecommunications industry and how they work together to bring about enforcement of the law and industry codes. We take stock of the types of conduct that led to these enforcement actions, and which highlight the importance of early cooperation with the relevant regulator to avoid the worst outcomes.

Unconscionable Conduct

Off the back of an action brought by the ACCC, with the cooperation of the ACMA and the ombudsman, SoleNet/Sure Telecom were found by the Federal Court to have engaged in unconscionable conduct in connection with the supply of telecommunications services.

Customer contracts were transferred or purportedly transferred from one SoleNet/Sure Telecom company to another without customers' knowledge or informed consent and these customers paid early termination or cancellation fees as a result. The companies then made demands for payment of the fees, with no contractual basis and in a manner that the court found constituted undue harassment.

The court ordered that the companies and Mr James Harrison, the sole director of both companies to pay a $250,000 fine and the ACCC's costs (which would likely be substantial). It further ordered the companies to refund monies paid by customers affected by the conduct.

According to the ACCC, these companies had been 'a substantial source of consumer complaints and a serious and ongoing regulatory problem' previously being found to be in breach of various provisions of the Telecommunications Consumer Protections (TCP) Code. One review site lists reviews from customers with titles "Solenet – lying, deceitful company! Avoid them at all costs!", "Elderly Abuse – SoleNet: The Worst Kind of Fraudsters", "Sure [T]elecom now hiding behind new name sole" and "Extortionists".

Director involved in bad behaviour

In the SoleNet/Sure Telecom case, the Federal Court also disqualified the sole director of both companies, Mr James Harrison, from managing corporations for a period of three years. The $250,000 fine mentioned above was also payable by Harrison, and the ACCC had applied at an earlier stage of trial to freeze his assets and that of his wife. Justice Moshinsky said in delivering his judgment "the contravening conduct was serious, deliberate... not ad hoc, but systemic and planned" and that "Mr Harrison... was 'hands on' in managing... day-to-day operations and intimately involved in their conduct". It seems there was no hiding behind the corporate veil on this occasion.

Non-compliance with Ombudsman's decision

In part to avoid the need to take action in courts and provide easier access to independent arbitrator at no cost to the customer, the telecommunications industry has in place an ombudsman (TIO). It is mandatory for telcos who have small business and residential companies to join the TIO and it is unusual for companies not to respect the decisions of the TIO (even if they sometimes do not agree).

Digital Technologies & Telecommunications Pty Ltd (trading as Airlan) in this case ignored multiple attempts by the TIO to enforce the TIO's determination to refund a former customer $660.

The direction made by the ACMA ordered Airlan to comply with the TIO determination and thereby issue the refund.

A direction to comply would usually detail actions to achieve compliance with that direction, by a set date. If the provider does not comply with a direction, the ACMA can then draw upon a range of other enforcement actions.

Breach of Telecommunications Consumer Protections (TCP) Code

Under the TCP Code, providers are required to make information available to their customers in a semi-prescribed form called a Critical Information Summary. They are also required to provide the information in a clear and accurate way (also a more general consumer law requirement).

The ACMA announced in March that it had directed Total Group Pty Ltd and Direct Connect Pty Ltd to comply with the relevant parts of the TCP Code as their Critical Information Summaries failed to provide clear and accurate information about internet plans, including some NBN-related plans. The failures included:

  • that certain pricing information was not accurate or clear;
  • certain plan names were not included, nor relevant charging information, important inclusions, qualifications and restrictions
  • providing contradictory information about products and inclusions on their websites.

If these providers fail to comply with the direction issued by the set date, the ACMA can pursue a range of further enforcement options including issuing an infringement notice, acceptance of an enforceable undertaking or commencement of civil penalty proceedings.

The ACMA has said that the NBN-related services of retail service providers will be a particular compliance priority in 2017.

Total Group Pty Ltd and Direct Connect Pty Ltd were reportedly given ample opportunity to correct the Citical Information Summaries before the ACMA commenced formal investigation. All these cases are a reminder of the need to engage early with regulators and to seek external advice if necessary to avoid a drawn out process.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Dan Pearce
Emily Booth
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