ACCC v EDirect Pty Ltd [2012] FCA 1045: Telemarketing of mobile phone services

In ACCC v EDirect Pty Ltd [2012] FCA 1045 (21 September 2012) the Federal Court dismissed an application from the Australian Competition and Consumer Commission (ACCC) for declarations that EDirect Pty Ltd engaged in systemic and specific unconscionable conduct, and misleading and deceptive conduct in its telemarketing of mobile phone services.

Basic Facts
The ACCC alleged that EDirect made misleading representations to its customers and engaged in unconscionable conduct by way of its sales methods and its dealings with specific customers by using a high pressure, relentless sales process.

Key Matters before the Court
A key issue was whether EDirect’s telemarketers had breached Trade Practices Act 1974 (Cth) s 52 by engaging in misleading and deceptive conduct in connection with the sale and supply of mobile telecommunication services, especially with respect to representations as to pre-approved credit of potential customers and representations as to referrals made by individuals known to potential customers. Another issue arose with respect to Trade Practices Act 1974 (Cth) s 51AB as to whether the unconscionable conduct proscribed by s 51AB was not limited to specific equitable doctrines. In this respect the court also considered the Parliamentary intention behind s 51AB as now expressed in Sch 2, s 21(4)(b) Competition and Consumer Act 2010 (Cth).

In its deliberations the court also considered its discretion to make declaratory orders under Federal Court of Australia Act 1976 (Cth) s 21 and the meaning of public interest in declarations relating to consumer protection litigation,

Courts findings

The court concluded that the ACCC has not established the referral representation and the approved credit representation by EDirect. Further the ACCC failed to establish, on the balance of probabilities, that EDirect designed and operated a high pressure sales system in its telemarketing calls to its potential customers and because of the various discretionary factors present in this case, even if the ACCC had established that EDirect’s conduct was unconscionable, and  in contravention of the Trade Practices Act 1974, in relation to some, or all, of the eight individual customers described in the ACCC’s statement of claim, the court would not have exercised its discretion to make the declaratory orders sought by the ACCC in relation to those eight individual customers because it was not persuaded, in all the relevant circumstances, that such declaratory orders would have been appropriate.

There have been two previous adverse findings against EDirect from the Court. Most recently EDirect was ordered to pay a $2.5m pecuniary penalty on 6 September 2012 for sale of mobile phone packages into remote communities where there is no mobile coverage on the Optus network. According to its website the ACCC is considering the judgment and whether to seek leave to appeal. On the topic of unconscionable conduct the ACCC has produced a Business Snapshot with information about what unconscionable conduct means and tips on how to avoid engaging in the conduct or becoming a victim of it.

Note: EDirect went into liquidation after the ACCC commenced this litigation.

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