Victorian Company Fined $225,000 For Cold-Calling And Claiming To Be Telstra

Thursday 2 October 2014 @ 11.03 a.m. | Trade & Commerce

Zen Telecom Pty Ltd has been fined $225,000 by the Federal Court for making false and misleading representations as well as contravening unsolicited consumer agreement provisions of the Australian Consumer Law (“the ACL”, schedule 2 of the Competition and Consumer Act 2010 (Cth)).  Zen Telecom also must publish corrective advertisements and institute a compliance program and procedures for handling complaints.  The proceedings were commenced by the Australian Competition and Consumer Commission (ACCC) in February, and Zen Telecom admitted its contraventions, a factor which mitigated the eventual fine.  The parties filed joint submissions, agreed facts and proposed orders.  

Facts of the Case

Zen Telecom, located in Melbourne, trades under a variety of names including Action Telecom, Alpha Talk, Telko Key, Venus Telecom and XLN Telecom.  They were contractually entitled to sell fixed line services provided on a wholesale basis by Telstra, but the company “was not part of Telstra, was not a related body corporate of Telstra, was not authorised to make telemarketing calls on behalf of Telstra and was a competitor of Telstra at the retail level” [at 30].  The case also revealed that the company “has never made a profit” and “will remain cash flow negative for the foreseeable future” [at 91].

Zen Telecom purchased general Australian residential and small business telephone calling lists and used two different companies – Vibe Solutions Pty Ltd and Marv E Solutions – to make telemarketing calls on its behalf.  It split the calls into two stages - a marketing stage, where the services were promoted, and an agreement stage, where a verbal agreement was made.  Zen Telecom only recorded the agreement stage of the calls.  In a media release, ACCC Commissioner Sarah Court said:

“The ACCC was concerned that by the time consumers progressed to the second stage of the call where they agreed to acquire services from Zen Telecom, they had already been misled by misrepresentations of an association or affiliation with Telstra which had been made during the marketing part of the call.”

Verdict at Court

The Federal Court listed a number of contraventions of the Australian Consumer Law made by Zen Telecom during the phone calls, which included:

  • An agent telling a Queensland restaurant manager that the company was “the new managers for your telephone account”.  When asked if he was from Telstra, the agent said “words to the effect “Yes, we use the Telstra line”” [at 15];
  • An agent who phoned a resident saying“I am calling from Venus Telecom and we are a subsidiary of Telstra.  We are here to help you with your Telstra bill” [at 17];
  • An agent who told a resident “this is a service call to inform you that as a Telstra customer, you are eligible for a discount on your telephone service of $20 - $25 a month” [at 19]; and
  • Another agent who told a business owner the discount would be “run through our wholesale department in Melbourne”, and when asked if she was from Telstra wholesale, said “We’re the authorised wholesale department, yes”.

Zen Telecom breached additional provisions of the ACL by not despatching agreement documents within five business days after the agreement was made (section 78(2) of the ACL), sending agreement documents to consumers that did not meet the requirements of the ACL (ss 79(b)(i), 79(b)(ii), 79(c)(i) and 79(d)(iv)) and supplying customers with services during the cooling off period (s 86(1)(a)).

Telstra’s Executive Director of Advocacy, Peter Jamieson, told the Sydney Morning Herald:

“We know people call our customers and claim they're from Telstra when they're not, or they try to switch Telstra customers to another telephone company with offers they can't deliver.  The Federal Court's decision sends a strong message to people who attempt to mislead customers with false information over the telephone that it is illegal behaviour and it must be stopped.”

According to The Australian, the case has prompted Telstra to start a community awareness campaign.  An information flyer, “Is it really Telstra calling?”, will be distributed to six million customers, and will set out what genuine callers will say to customers. 

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

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