Telco marketer fined AU$2.5M for misleading indigenous communities

VIPtel has been fined AU$2.5 million by the Australian Federal Court for signing up new mobile customers in remote communities across Australia where there is no mobile network coverage available.

The company obtained contracts with 350 customers in regional communities in Queensland, New South Wales, Western Australia, Tasmania and the Northern Territory. The Australian Competition and Consumer Commission (ACCC) took the company to court in 2010, alleging that VIPtel would enter a verbal contract with consumers for mobile phone packages by reselling Optus services, and would pressure participants into direct debit billing options where the money was automatically deducted from their accounts.

The ACCC alleged that VIPtel would do this even where it had identified that the person could not afford the plan, was unwell, or had difficulty understanding the telemarketer. The ACCC was drawn to the case after complaints from customers in the North Queensland indigenous community of Aurukun.

In fining the company AU$2.5 million today, Justice John Reeves said that VIPtel has been "unscrupulous" in its conduct, and said the fine was imposed to make it so that it would be "commercial suicide" for any other company to attempt to do the same in the future.

"I consider the penalty should act as a general deterrent to companies who use telemarketers in the way that occurred in this case," he said. "If such companies, whether mobile telephone companies or others, do not properly supervise and control their telemarketers to ensure that they comply with Australia's consumer protection laws, they can expect to be dealt with severely"

ACCC chair Rod Sims called on the telecommunications industry to ensure that this would not happen again.

"This is grave and intolerable conduct in the telco industry. I call on the major telecommunications carriers to take appropriate steps to ensure that their resellers lawfully deal with consumers," he said in a statement.

The company had previously been reprimanded by the court back in 2008 for the same issue, but was then only issued a AU$50,000 fine. VIPtel's trading company EDirect is now in liquidation, but the ACCC has negotiated the payment of AU$100,000 in refunds to customers mislead by the company.

Under the new Telecommunications Consumer Protection code put into force this month, telecommunication companies will be required to provide clearer terms and conditions for mobile plans, and may face tougher regulation and penalties if they fail to comply with the code.