Optus attacks court's profit stripping

Stripping most of Optus' profits for selling broadband plans using misleading advertising is unfair and outside of the law, the telco's lawyers argued today.

The Moose's antlers were misleading
(Screenshot by Josh Taylor/ZDNet Australia)

Last year, Optus copped a landmark $5.26 million fine from the Federal Court over a series of TV, radio, print, online and billboard advertisements for "Supersonic" and "Think Bigger" fixed-line broadband plans advertised between April and September in 2010.

Federal Court Judge Nye Perram found that the advertising 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 Australian Competition and Consumer Commission (ACCC), which brought the case against Optus, had inferred that the telco failed to disclose that once a user had surpassed their off-peak quota, their peak quota would be deducted for any downloads thereafter.

In front of the Full Court today, Optus counsel Justin Gleeson said that by imposing the $5.26 million fine, Perram had sought to strip Optus of almost all of its profits from customers who had signed up to the plans after the advertisements aired. Gleeson said this raised questions of how this "profit-stripping" notion fell under the Trade Practices Act. He said Perram had awarded such a high penalty not only to deter Optus, but also other telcos from engaging in similar practices, but he said that Optus had not set out to deliberately mislead customers in order to profit from these plans. He pointed to email correspondence between Optus and the ACCC that was used in the original trial, showing that Optus had engaged with the ACCC in a number of instances before the regulator had launched legal action, seeking to ensure the ads met the requirements of the law and undertakings to the ACCC.

He said Optus had five full-time lawyers devoted to vetting all advertising the telco puts out, so the company did take complying with the Trade Practices Act seriously.

Although Perram had found that the "impression" from ads such as the "Think Bigger" ad did not convey that speeds slowed once a user went over their limit from the "impression" of the ad, and that the oversized antlers on the moose could lead customers to think they were getting more in their download limit than they were paying for, Gleeson said that since the ruling, Optus wrote to 87,000 customers offering an out on their contracts and only 14 changed. He said just three of those 14 complained about the advertising.

"It hasn't greatly troubled consumers," he said.

Gleeson said that Perram has made an error in judgment around the requirements of section 52 of the Trade Practices Act, the section that deals with misleading or deceptive conduct.

The case resumes this afternoon.