Telco giant Optus has been fined more than $5 million by the Federal Court after an Australian Competition and Consumer Commission investigation found the company made misleading statements while advertising its broadband services.
The fine is one of the largest imposed on an Australian telco for making misleading statements, after others including Dodo were hit with charges. The ACCC has warned the telco industry that this type of behaviour will not be tolerated.
“The entire telecommunications industry needs to sit up and take notice. This conduct is not acceptable and the ACCC will seek the harshest penalties the law allows,” chairman Graeme Samuel said.
Chris Coughlan, senior broadband analyst for Telsyte, says consumers are becoming more frustrated by broadband advertising and more attention from the ACCC is welcome.
“I think in the mobile industry there is a general problem with the way things are promoted,” he says.
“One particular issue that bothers me is that you have these caps which say “pay $50 and get $500 worth of calls”. Except if you’re paying $50 you only really get $50 worth of calls. In the US you pay $300 and get 300 minutes or something similar.”
The recent Optus fine, which came after $1780,000 worth of infringement notices in May this year, was a response to the Think Bigger and Supersonic campaigns which ran during October 2010.
The Think Bigger plans offered 120GB of data for $49.99 and 150GB for $59.99 per month. The Supersonic plans offered 120GB for $69.99, 150GB for $79.99 and 170GB for $89.99. All plans were split into “peak” and “off peak” allowances.
The ACCC says Optus didn’t “sufficiently disclose” that services would be “shaped” down to a lower speed once caps had been reached in off-peak or peak periods. Those speeds could be as slow as 64kpbs.
Justice Perram of the Federal Court said the $5.2 million penalty would work as a deterrent to Optus and “also to other traders who might be tempted by the thought that misleading advertising is a profitable strategy”.
“These penalties will demonstrate that it is not,” he said.
The fine highlights the confusion surrounding broadband advertising in Australia, where some offers have been marketed as “unlimited” downloads but once users reach a certain limit their speeds are capped, effectively stopping them from downloading anything substantial.
Earlier this year the Federal Court found Global One Mobile Entertainment and 6G for false and misleading advertising pertaining to mobile phone services.
“This decision sends the clear message that misleading consumers is not a legitimate business strategy. Optus is not a small business but a large company that engaged in misleading and tricky conduct,” Samuel said.
Coughlan says the industry needs to continue to make broadband packages easier for consumers to understand.
“I think the ACCC is finally getting on top of the industry which is great. It would finally be good to see consumers be able to compare different packages without having to use a spreadsheet.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
