Australia’s largest telecommunications company Telstra is facing penalties of up to A$10 million for allegedly collecting more than A$61.7 million in net revenue from commissions on premium billing services in a way that the consumer regulator says breached the law.
On Monday, the Australian Competition and Consumer Commission said it had commenced proceedings against Telstra, alleging that the telco had made false or misleading representations to consumers in relation to its third-party billing service, known as ‘Premium Direct Billing’.
It comes as the telco agreed to shut down its premium billing service entirely, and the ACCC said it was keeping an eye on other telecommunications companies providing similar services.
To date, Telstra has admitted to the ACCC that it made the alleged representations, and agreed to consent to orders in the Federal Court, including declarations that it breached the ASIC Act. It’s agreed to make joint submissions in relation to the imposition of pecuniary penalties totalling A$10 million. Telstra has also committed to offer refunds to affected customers, the ACCC said.
During 2015 and 2016, the ACCC said thousands of Telstra mobile phone customers unwittingly signed up to subscriptions or charges with third parties, without being required to enter payment details or verify their identity.
Telstra has admitted that more than 100,000 customers may have been affected and charged, while the ACCC added that some 2.7 million mobile numbers were involved.
“Telstra has admitted that it misled customers by charging them for digital content, such as games and ringtones, which they unknowingly purchased,” ACCC chairman Rod Sims said in a statement. “Many Telstra customers paid for content they did not want, did not use, and had difficulty unsubscribing from.
“Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases made without their knowledge or consent. Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers.”
Sims added that when customers contacted Telstra to complain, many were directed to third parties, “even though Telstra knew that they had difficulty getting a refund” from a third party.
“Customers were often left frustrated and out of pocket as a result of Telstra’s conduct,” he said.
As a result of the ACCC’s actions, Telstra has agreed to refund customers affected by its conduct. According to the ACCC, Telstra estimates it has provided refunds of at least A$5 million so far.
Telstra will review any future complaints in light of the ACCC’s action, the watchdog said, noting that it estimates further refunds “may be in the order of several million dollars”.
“The ACCC is aware that other carriers offer similar third-party billing services to their customers. We are monitoring complaint levels and will take enforcement action in relation to these carriers if we believe they are breaching the law,” Sims said.
Meanwhile, Shadow Minister for Communication Michelle Rowland welcomed the ACCC scrutiny of this area. “Consumers need greater transparency about third-party billing arrangements and how they are represented,” she said. “The industry also needs to do more to discourage these types of shifty business models.”