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Australia – A Warning To Telecommunications Service Providers About The Use Of Telemarketers.

18 September, 2013

ACCC v Excite Mobile Pty Ltd [2013] FCA 350


WHAT YOU NEED TO KNOW

 

  • The ACCC is cracking down on unconscionable and misleading and deceptive conduct engaged in by telemarketers on behalf of telecommunications service providers.


WHAT YOU NEED TO DO

 

  • Whilst the conduct of the service provider in this case was particularly egregious, it warns against basic mistakes by telemarketers – such as misrepresenting coverage and not properly informing customers.


The Federal Court of Australia recently gave consideration to the conduct of telemarketers in ACCC v Excite Mobile Pty Ltd [2013] FCA 350.


Trade Practices Act


The case concerned the behaviour of a mobile telephone services provider, Excite Mobile. Excite Mobile was found to have breached the Trade Practices Act 1974 (Cth) (the Act), which was in force at the time of the alleged acts and omissions, because:


1. Excite Mobile engaged in unconscionable conduct by adopting an inappropriate telemarketing sales method (section 51AB of the Act). Mansfield J found that the service offered by Excite Mobile was unusual and not suited to the everyday user. However, the sales pitch “only fleetingly” explained the unusual feature and the telemarketing process was “pushy” and gave the consumer little time for thought or for questions. His Honour remarked that “It was unfair to such a degree as to attract a strong adverse moral judgment“.


2. Excite Mobile engaged in misleading and deceptive conduct by misrepresenting the coverage available to customers (sections 52 and 53(c) of the Act). In 16 cases, Excite Mobile’s telemarketers incorrectly represented that the customer had mobile coverage at their home addresses. It was irrelevant that the misrepresentations were caused by “human error” in checking the coverage.


3. Excite Mobile engaged in misleading and deceptive conduct by representing to consumers that the “Telecommunications Industry Complaints” (TIC) body, where Excite Mobile’s customers were referred to for complaints, was an independent body (sections 52 and 53(g) of the Act). TIC was, in fact, affiliated with Excite Mobile and created to avoid customers making complaints to the Telecommunications Industry Ombudsman.


4. Excite Mobile engaged in misleading and deceptive conduct, unconscionable conduct and undue coercion by creating a fictitious debt collector, called Jerry Hastings, to contact Excite Mobile’s debtors (sections 51AB, 52, 53(g) and 60 of the Act). “Jerry Hastings” used strong and threatening language, in order to “intimidate all but the well informed or well experienced debtor into responding to them“. The letters falsely asserted that a court would order extra charges for outstanding debts and repossession of all assets of the debtor. For example, one of the standard form letters from “Jerry Hastings” included the following statement:


Believe me there is no way you want to meet my lawyer in court. While she seems like a nice lady she is a killer in front of the judge. One case she even got the judge to order a young mother have her kids game machine repossessed. She has no feelings towards you at all. Her job is to be as mean as possible towards you. She can make your life extremely uncomfortable.

 

Personal liability


Excite Mobile’s directors, Mr Brown and Mr Samuel, and an agent of Excite Mobile, Ms Smart, were also found to be liable for the breaches of the Act. Mr Brown was responsible for the operations of Excite Mobile and was found to be involved in and knowingly concerned in all of the breaches. Ms Smart sent the “Jerry Hastings” letters and was found to have been knowingly involved in the misleading conduct.


Mr Samuel was a director of Excite Mobile, but he argued that he was only “nominally involved” in its operations. Mansfield J disagreed saying, “I think that over time he has come to view his role in Excite Mobile as somewhat less than it was“. It was sufficient for accessorial liability for Mr Samuel to have been aware of, and to have supported, the use of the sales script and “Jerry Hastings” letters.


A warning about telemarketers


Mansfield J was highly critical of the telemarketing used by Excite Mobile. His Honour suggested that “[i]t may be appropriate to consider whether … the supplier should be required to give to the consumer the opportunity to listen to the recorded interview upon which the contract is said to arise” before the contract is formed.


Another telecommunications service provider was recently the subject of ACCC investigations. On 4 June 2013, Utel Networks Pty Ltd paid three infringement notices, costing it $19,800, to the ACCC for conduct including making false or misleading representations to consumers about the quality of the service they would receive upon being transferred to Utel Networks. As the ACCC Commissioner Sarah Court said in relation to the Utel Networks investigation, “The ACCC will continue to hold companies responsible for what is said or done by their authorised representatives. Lack of oversight by businesses will not be accepted as a valid excuse for misleading consumers.

 

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For further information, please contact:

 

Gordon Hughes, Partner, Ashurst
gordon.hughes@ashurst.com


George McCubbin, Ashurst
george.mccubbin@ashurst.com

 

Ashurst TMT Practice Profile in Australia

 

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