Consumer law – admitted contraventions of s21 of Australian Consumer Law…

…determination of pecuniary penalty – declaratory relief and penalties awarded in terms sought by parties

In Australian Competition and Consumer Commission v Telstra Corporation Limited [2021] FCA 502 (13 May 2021, Mortimer J) the Australian Competition and Consumer Commission (ACCC) commenced proceedings in the Federal Court against Telstra in respect of alleged unconscionable conduct (s21 of the Australian Consumer Law) that occurred between January 2016 and August 2018.

The parties ultimately filed a statement of agreed facts and admissions and proposed consent orders. The court conducted a hearing in relation to the proposed orders and quantum of penalty.

Factual setting

The contraventions occurred in five Telstra stores which serviced remote Indigenous Australian communities and sold post-paid services with ‘add ons’ to customers. It was agreed that Telstra was in a substantially stronger bargaining position than the affected customers because of the personal circumstances of many of the affected customers, including that many of them spoke English as a second, third or fourth language, had difficulty with reading, writing or understanding financial concepts, and were unemployed and dependant on government benefits. Telstra was also the only service provider in many of the affected remote communities, such that the customers had little or no choice but to use the Telstra stores.

Telstra admitted, among other things, that its staff had in some instances:

• engaged in unfair tactics by not giving a full and proper explanation of the contract and charges
• falsely represented the impression that customers would receive a device for “free”
• sold customers extra “add ons” that they did not want
• failed to take adequate steps to determine whether the cost of the post-paid products and services were affordable for the particular consumer
• exploited the consumer’s lack of understanding and/or took advantage of a cultural propensity for Indigenous Australian people to express agreement as a means of avoiding conflict
• manipulated aspects of Telstra’s credit assessment process, which meant that affected consumers were approved for the post-paid products when they should not have been.

All of the affected consumers consequently incurred significant debts to Telstra, averaging $7461. Some of those debts were sold by Telstra to third-party debt collectors. Telstra subsequently waived all the debts and refunded amounts to the sum of $979,507.

Proposed penalty

The parties proposed that Telstra pay a pecuniary penalty of $50 million. Telstra also agreed to enter into an enforceable undertaking with a term of five years and to enhance the “digital literacy training” programs for customers in nominated Aboriginal communities.

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Consideration

Mortimer J addressed the principles relevant to the court’s consideration of penalty, including that the court was not bound to give effect to the sum proposed by the parties (at [30] ff). Her Honour noted at [46]-[50] that the total statutory maximum penalty available in this case was more than $130 million. Her Honour accepted that, particularly as the facts were agreed, the conduct arising from each individual store could be characterised as a single course of conduct. The court accepted that the totality principle did not warrant an alteration (up or down) to the proposed penalty sum because of the significant overlap in wrongdoing.

The court accepted the parties’ submission that the nature, extent and duration of the conduct was “extremely serious”, geographically widespread, systematic and dishonest. The loss and damage was of a serious kind. Telstra’s cooperation with the ACCC had been substantial and deserved recognition. Its public apology was also given weight.

The court accepted the parties’ joint proposal as to a total penalty of $50 million, and also granted the declaratory relief sought by the parties.

Anthony Lo Surdo SC is a barrister, arbitrator and mediator in 12 Wentworth Selborne Chambers, Sydney, and Lonsdale Chambers, Melbourne. Theresa Power is a barrister in 12 Wentworth Selborne Chambers, Sydney.