The Federal Court has fined Telstra $50 million for unethically selling mobile contracts to more than 100 Indigenous consumers.
The ACCC has instituted Federal Court proceedings against Telstra on 26 November 2020. In those proceedings, Telstra admitted that it breached the Australian Consumer Law between January 2016 and August 2018.
During that time, the sales staff at five licensed Telstra-branded stores unethically signed up 108 Indigenous consumers to multiple post-paid mobile contracts.
Not only did the sales staff fail to explain the potential costs of the contract to the Indigenous consumers, but they also made them believe that they were receiving the products for ‘free’.
There was also manipulation of credit assessments. Consumers who would have failed the credit assessment process could purchase post-paid mobile products after the sales staff falsely indicated that they were employed.
The incident happened at licensed stores in Alice Springs, Casuarina and Palmerston (NT), Arndale (SA), and Broome (WA).
The Indigenous consumers who were affected by the incident came from remote communities located near these stores. This includes the regions surrounding Darwin, the islands off of Northern Territory, the Kimberley region and the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) in central Australia.
“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, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”
ACCC Chair Sims also revealed that Telstra’s board and senior executives failed to act quickly after being alerted of the illegal practice.
The $50 million fine against Telstra is the second-highest penalty ever imposed under the Australian Consumer Law. ACCC Chair Sims states the fine is appropriate since Telstra is Australia’s biggest telecommunications company and its behaviour on the issue was immoral.
Telstra has admitted liability and has cooperated with the ACCC’s investigation. It has also made joint submissions with the ACCC to the Court in relation to penalty and other orders.
Aside from the remedies ordered by the Court, Telstra will also provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline and enhance its digital literacy program in certain remote areas. They have taken steps to waive the debts, refund money and put measures that will reduce the risk of similar future incidents
“We expect much better behaviour from large businesses like Telstra, but all businesses in Australia have a responsibility to ensure sales staff are not breaching consumer law by manipulating or tricking consumers into buying products or services they do not need or cannot afford,” ACCC Chair Sims said.