Optus cops AU$10m penalty for misleading customers

The Federal Court has levelled a AU$10 million penalty on Optus for misleading customers over third-party billing services, with the telco also already paying another AU$8 million in refunds.

Optus has been fined AU$10 million by the Federal Court of Australia after it admitted to misleading consumers and breaching the ASIC Act for its third-party billing practices.

The telco also admitted that it had knowledge from as early as April 2014 that customers were being billed for direct carrier billing (DCB) services that they had unknowingly or mistakenly signed up for.

The Australian Competition and Consumer Commission (ACCC) had in October commenced legal proceedings against Optus for its DCB practices, seeking AU$10 million in penalties.

The "premium content" services for which Optus customers were charged included ringtones, games, and horoscopes, with the ACCC claiming that customers had not wanted or agreed to purchase these.

Optus, which made around AU$65.8 million from commissions on these since 2012 but has since ceased offering the services, "admitted that it did not properly inform customers that the DCB service was a default setting on their accounts, and that they would be billed directly by Optus for any content bought through the service, even unintentionally", the ACCC said on Wednesday.

Optus also failed to develop "appropriate identity verification safeguards" despite receiving more than 600,000 enquiries, the ACCC added. In some cases, purchases or subscriptions could be made with only one or two clicks through a web browser.

The telco also referred customers with billing enquiries to third parties, where they then faced difficulties in obtaining refunds and cancelling subscriptions.

"In many cases, Optus customers had no idea they were buying anything, and certainly did not need or want the content for which they were being charged," ACCC chair Rod Sims said.

"Optus failed to take appropriate action, choosing instead to continue to charge customers and collect commissions on these sales, even after numerous complaints."

Optus has already paid AU$8 million in refunds to around 240,000 customers, with third-party providers paying a further AU$13 million in refunds to Optus customers. The telco is also required to contact any customers who may have been impacted by its conduct.

"Given the volume of enquiries to Optus about the service, there are likely to be many affected customers that have not yet received a refund," the ACCC noted.

"We are pleased that the court agreed that this conduct is simply unacceptable, and deserves a significant penalty," Sims said.

Last year, the ACCC had similarly announced that Telstra had issued refunds to 72,000 customers of AU$9.3 million in total after misleading customers on its premium direct billing (PDB) service.

"Following our action, Telstra has paid close to AU$20 million in penalties and refunds. This should serve as a warning to all telecommunication providers that misleading and deceiving customers will result in serious consequences," Sims said in September.

The Australian Federal Court had in April 2018 ordered Telstra to pay AU$10 million in penalties for making false or misleading representations to consumers on the management of its PDB service, after finding that Telstra misled customers and breached the ASIC Act.

According to the ACCC, Telstra made false or misleading representations to consumers between 2015 and 2016 by charging more than 100,000 customers for PDB subscription services who had not requested them or had the ability to opt out of them.

Telstra has ceased operating the PDB service.

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