Telstra fined $50m for unconscionable sales tactics

The Federal Court has ordered Telstra to pay $50 million in penalties for engaging in unconscionable conduct by selling mobile contracts to more than 100 Indigenous consumers across three states and territories, in proceedings brought by the ACCC.

Telstra admitted that between January 2016 and August 2018, it breached the Australian Consumer Law when sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple postpaid mobile contracts which they did not understand and could not afford. The ACCC instituted Federal Court proceedings against Telstra on 26 November 2020, for the sale of postpaid mobile products to Indigenous consumers.

Telstra operates stores across Australia, including stores operated by independent licensees which sell Telstra products and services on behalf of Telstra through Telstra-branded stores. The admitted unconscionable conduct occurred at licensed stores in Alice Springs, Casuarina and Palmerston (NT), Arndale (SA) and Broome (WA).

Consumers from remote Indigenous Australian communities located near these stores were affected by the alleged conduct, including the regions surrounding Darwin, the islands off the Northern Territory, the Kimberly region and the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) in Central Australia.

ACCC Chair Rod Sims said 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.

“This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers. Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them,” said Sims.

In some cases, sales staff at the licensed stores failed to properly explain the potential costs of the contract to the consumers and falsely represented that consumers were receiving products for ‘free’. Sales staff also manipulated credit assessments, so consumers who otherwise may have failed a credit assessment process could purchase postpaid mobile products. This included falsely indicating that a consumer was employed when they were not.

“The $50 million penalty imposed against Telstra is the second-highest penalty ever imposed under the Australian Consumer Law. This is appropriate given the nature of the behaviour by Australia’s biggest telecommunications company, which was truly beyond conscience,” said Sims.

Telstra has since taken steps to waive the debts, refund money paid and implement measures to reduce the risk of similar conduct in future. In addition to the remedies ordered by the Federal Court, the ACCC has accepted an enforceable undertaking from Telstra, in which Telstra will provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline, and enhance its digital literacy program for consumers in certain remote areas.

“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,” said Sims.

Telstra admitted liability, cooperated with the ACCC’s investigation, and made joint submissions with the ACCC to the Court in relation to penalty and other orders.

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