Optus has today been ordered by the Federal Court to pay a massive $5.26 million in fines for misleading broadband advertising.
The court erupted in shock at the high penalty imposed by Justice Nye Perram in the Australian Competition and Consumer Commission (ACCC) case against Optus, which sought to bring the telco to task for 11 advertisements from its "Think Bigger" and "Supersonic" broadband campaigns run on TV, radio, billboards and online last year.
The court found that the advertising for the fixed-line broadband plans was deceptive because the telco hadn't made it clear that users would have their speed reduced to 64 kilobits per second once they had exceeded their monthly peak or off-peak allowances. The ACCC had inferred that Optus failed to disclose that once a user had surpassed their off-peak quota, their peak quota would be deducted for any downloads thereafter.
"The contravention here is a serious one and the public should be protected from any further repetition of it. Optus placed before me no evidence as to why it had ceased the conduct or that it had done so having come to the view that it had infringed and thereafter desired to cease from doing so again," Perram said in his original judgement.
In addition to the penalties, Optus has had a three-year ban placed on it from launching similar ad campaigns.
Perram today also ordered that some of the evidence used in the case remain confidential. When Optus attempted to bring a similar case against Vodafone for advertising for its "Infinite" plans, Vodafone had sought to use some of Optus' own market research evidence in that case, which argued that consumers investigated broadband plans before signing up to them. Optus ultimately decided not to proceed with the case and was ordered to pay Vodafone's costs.
Both Optus and the ACCC will front the court again at a later date to be heard on the determination of costs associated with the case, Perram said.
Outgoing ACCC chair Graeme Samuel said the judge's decision should be a warning to other telcos.
"The entire telecommunications industry needs to sit up and take notice. This conduct is not acceptable, and the ACCC will seek the harshest penalties the law allows." Samuel said.
Optus told ZDNet Australia it was disappointed by the judgment and will be considering its options.
"Optus always strives to provide our customers with the best value products and services. We clearly aim in our advertising to give customers a good understanding of what a plan or offer includes. In the case of the Think Bigger campaign we obviously didn't get it right and we apologise for that," Optus said. "This has been a lesson for us in making sure that we are very careful and deliberate in how we communicate the value in our plans."
Advertising has received much attention of late. Ahead of the roll-out of the National Broadband Network (NBN), the ACCC last week released a paper informing telcos that the download speeds advertised for hybrid fibre-coaxial and fibre-based broadband plans must reflect the actual download speeds a customer can actually use. The watchdog has warned that internet service providers will face litigation and harsh penalties if they are caught misleading consumers on actual download speeds.
Updated at 8:45am, 8 July 2011: added comment from ACCC and Optus.