The Australian Competition and Consumer Commission (ACCC) has commenced proceedings in the Federal Court against 11 corporations trading as SoleNet and Sure Telecom, and their director James Harrison.
The ACCC alleges Harrison and his companies, known as the Harrison Companies, engaged in unconscionable conduct in the supply of telecommunications services and undue harassment, which the watchdog said is in breach of the Australian Consumer Law.
Since 2011, various companies controlled by Harrison, including Sure Telecom, Telco Service Holdings, and SoleNet, have provided telecommunications services to residential and small business customers.
"The ACCC's case is that customers were not informed about, and did not consent to, their telecommunications contracts being transferred to other Harrison Companies, which the ACCC alleges was largely to avoid regulatory difficulties and debts," ACCC Chairman Rod Sims said.
"It is alleged that this conduct was then compounded by the Harrison Companies seeking to enforce early cancellation and termination fees which were not part of any contract between the consumer and that company, and harassing consumers for payment of these alleged debts."
The commission is also alleging that the Harrison Companies engaged in unconscionable conduct by ceasing trading and winding up companies which incurred regulatory sanctions and unpaid debts to regulators.
According to the ACCC, the Harrison Companies also actively sought payment of early termination fees and cancellation fees from transferred customers when the Harrison Company seeking the payment actually had no contractual right to payment. Allegedly, the Harrison Company referred debts to a debt collection agency and law firm, each of which sent letters demanding the payment of early termination and cancellation fees pursuant to purported contracts between the "new" companies and the transferred customers. The ACCC said the customers had not in fact entered into contracts with the relevant "new" companies.
Additionally, the Harrison Companies engaged in undue harassment of transferred customers in relation to the payment of these alleged debts, and Harrison himself was involved or knowingly concerned in the contraventions, the ACCC allege.
On March 10, the ACCC filed an interlocutory application seeking a freezing order against James Harrison and the Harrison Companies from removing from Australia, disposing of, diminishing the value of, or otherwise dealing with any of their assets in Australia, the watchdog said. Justice Moshinsky made freezing orders against James Harrison and the Harrison Companies a day later, with Moshinsky extending the freezing order on March 16 to cover assets controlled by a Mrs Kelly Harrison.
Since 2011, various Harrison Companies have been a substantial source of consumer complaints and a serious and ongoing regulatory problem for the Telecommunications Industry Ombudsman (TIO) and the Australian Communications and Media Authority (ACMA). Both the TIO and the ACMA are assisting the ACCC in its investigation which is listed for a case management conference on April 12, 2016 before Justice Moshinsky in Melbourne.
The ACMA found in December that Comms Service Ops, a rebranding of SoleNet, repeatedly failed to comply with the Telecommunications Consumer Protection (TCP) Code.
The ACMA found the telco breached the code on 24 instances between April 14 and May 5, 2015 and misrepresented the nature of calls made to its customers; made misleading and inaccurate assertions; omitted key information; failed to obtain informed consent from consumers before transferring their services from SoleNet to Sure Telecom; failed to provide consumers with important information about interruptions to its service during the transfers; failed to inform consumers that penalty or cancellation fees may have to be paid; and failed to notify customers of the completion of the transfer.
Former ACMA chairman Chris Chapman called the situation "particularly disturbing", as the company had already been directed by the ACMA to comply with the TCP Code on April 9, when a previous investigation, undertaken due to a "disproportionately large" number of complaints to the TIO about the telco, found that it had breached the code.
Sure Telecom was already on the authority's radar when it was issued its own direction after the ACMA found the telco had breached 19 separate clauses of the TCP during March 2014.
According to the ACMA, 12 of the rules breached by Sure Telecom related to communication and telecommunications offers and sales practices, while another seven rules were breached related to changing suppliers. At one point, Sure Telecom was found to be making unauthorised customer transfers from other providers.
At the time, Chapman described the behaviour of Sure Telecom as "completely unacceptable".
Sure Telecom was then issued with a direction to comply on September 10, 2014 and the company was since placed in external administration.
The ACMA had previously issued a warning to Sure Telecom in April 2013, but the telco moved quickly to comply with the TCP code at the time.
Following another ACCC investigation, telecommunications provider Exetel agreed in January to compensate its customers that were affected by changes it made to its fixed-term residential broadband plans, after the ACCC ordered them to do so.
According to the watchdog, Exetel made changes to more than 2,000 residential broadband customers' 12-month fixed-term contracts mid last year, and informed them that they were required to either change their broadband plans or terminate their service without penalty. Exetel went about making the contract changes under a clause that was outlined in its standard residential broadband agreement, which stated the company could vary any part of that agreement for any reason. The ACCC ruled that clause an unfair contract term under Australian Consumer Law.