ACCC Fines Telco For Unfair Contract Terms
Friday 12 February 2016 @ 8.17 a.m. | Legal Research | Trade & Commerce
Telecommunications company Exetel has agreed to compensate consumers affected by changes made to its fixed term residential broadband plans, after concerns were raised by the Australian Competition and Consumer Commission (ACCC).
Background
In May 2015, Exetel wrote to more than 2,000 residential broadband customers on 12-month fixed term plans, informing them that they were required to either change their broadband plan or terminate their Exetel service without penalty.
Exetel relied on a clause in its standard residential broadband agreement which provided that Exetel could vary any part of that agreement for any reason.
Chief Marketing Officer, Ben Colman said at the time:
"We believe it is unfair for current users to subsidise a handful of exceedingly heavy users who have not re-contracted with Exetel at our current, and very competitive prices. For the benefit of all our customers, we've taken the difficult decision to let go a small number of users. In this instance, the number of customers is higher than we'd expect, or like to see."
Exetel gave the affected users 30 days to churn to another provider or Exetel plan. This move was a repeat of action taken in 2010 to get rid of 500 similarly heavy usage customers the company deemed unprofitable.
Investigation by the ACCC
Following an investigation, the ACCC considered that the clause was an unfair contract term which was likely to contravene the Australian Consumer Law (ACL) [Sch 2 in the Competition and Consumer Act 2010 (Cth)].
The ACCC also considered that Exetel’s advertising of these fixed term plans was likely to be misleading because it represented that consumers would receive the service for the 12-month fixed term, when this was not necessarily the case.
Exetel cooperated with the ACCC’s investigation and, in response to the ACCC’s concerns, agreed to:
- remove the clause from its residential broadband standard form of agreement;
- refund any additional monthly subscription costs incurred for the remainder of the fixed term by customers who changed to a new plan; and
- refund any activation charge previously paid by customers who terminated their Exetel service rather than change to a new plan.
Comment from the Exetel CEO
The Exetel CEO Richard Purdy said in a statement that the company had been forced to react to the local introduction of streaming services like Netflix, which have "fundamentally changed Australian internet usage patterns and spurred a large increase in data usage":
"Our strong network performance over this period reinforces the need to manage our network for the benefit of all customers. We apologise to customers who were impacted by this decision and have already made a number of changes to address this situation, including changes to our terms and conditions."
The ACCC Reaction
Commenting on this issue in a recent ACCC Media Release, ACCC Acting Chair Dr Michael Schaper said:
“The Australian Consumer Law provides that unfair contract terms in standard form consumer contracts are void. The ACCC considers that contract terms which allow a supplier to unilaterally vary the agreement for any reason are likely to be unfair. The ACCC will also be writing to other telecommunications providers with similar outdated terms in their consumer agreements, to put them on notice of the ACCC’s concerns and encourage them to review and update their standard agreements. Telecommunications companies should also be mindful that from November 2016, the law will also protect small businesses from unfair terms in standard form contracts.”
For further information on the new legislation proposed for small business, please see our previous article.
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Sources:
Exetel slapped for dumping heavy broadband users
Exetel compensates consumers following ACCC investigation – ACCC Media Release MR 5/16
