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The Federal Court has ordered that telecoms giant Telstra pay $50-million in penalties for engaging in “unconscionable conduct” when it sold mobile contracts to more than 100 Indigenous consumers across three states and territories.
Telstra admitted that between January 2016 and August 2018, it breached the Australian Consumer Law and acted unconscionably when sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple post-paid mobile contracts which they did not understand and could not afford.
This is the second highest penalty ever imposed under the country’s consumer laws. The company admitted liability and agreed to cooperate with the investigation.
The case was brought by the Australian Competition and Consumer Commission (ACCC), which said following the court judgement that the penalty was “appropriate given the nature of the behaviour by Australia’s biggest telecommunications company, which was truly beyond conscience”.
“Sales staff in these Telstra-branded stores used unconscionable practices to sell products to dozens of Indigenous customers who, in many cases, spoke English as a second or third language,” ACCC Chair, Rod Sims, said.
“This conduct included manipulating credit assessments and misrepresenting products as free, [as well as] exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”
He added that Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them.
In some cases, sales staff at the licensed stores failed to properly explain the potential costs of the contract to the consumers and falsely represented that consumers were receiving products for ‘free’.
In many instances, sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment process could purchase post-paid mobile products. This included falsely indicating that a consumer was employed when they were not.
Telstra has since taken steps to waive the debts, refund money paid and put in place measures to reduce the risk of similar conduct in the future.
In addition to the remedies ordered by the Federal Court, the ACCC has accepted a court-enforceable undertaking from Telstra, in which the company undertakes to provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline, and enhance its digital literacy program for consumers in certain remote areas.
In his response, the Chief Executive of Telstra, Andy Penn, admitted it was “a deeply challenging and disappointing chapter” in the company’s history.
“It is clear we need to better understand and support our Indigenous customers. That means spending time on Country, as I have done on several occasions since this issue came to light, and will continue to do as well as listening to and learning from Indigenous customers and communities, meeting with community leaders, Elders, and Indigenous organisations,” he said.