Optus faces fines after losing ads battle

update The Australian Competition and Consumer Commission (ACCC) is looking to have Optus pay civil penalties and have a five-year injunction placed on the company after the Federal Court found that the telco had misled consumers with its "supersonic" broadband advertising campaign.

If such monetary penalties were applied to Optus, it would be the first of its kind since the ACCC's powers were beefed up earlier this year.

The ACCC's case against Optus is in relation to 11 advertisements from the "Think Bigger" and "Supersonic" broadband campaigns Optus ran on TV, radio, billboards and online earlier this year.

The ACCC argued 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 ACCC also 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.

In the hearing last week, Optus referred to a number of studies and website traffic data to argue that consumers rely on more than advertising in deciding which broadband plans they sign up for.

However, in the judgement issued on Friday and published late yesterday, Justice Nye Perram ruled against the telco, ordering injunctions be placed on Optus to prevent similar advertising in the future.

"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 judgement.

"That being so, I am far from convinced either that Optus' recent cessation is anything other than opportunistic or that it signals some newly obtained underlying comprehension of the need to avoid such tricky behaviour in the future. In those circumstances, injunctive relief is appropriate."

The ACCC has sought a five-year injunction to prevent Optus from advertising similar deals in that time. In a directions hearing held for the case today, counsel acting for Optus Stephen Finch argued that a three-year injunction would be more appropriate given the "changing environment" of the telecommunications industry and a five-year injunction would place a disproportionate burden on the company.

ACCC barrister Neil Williams SC argued that Optus' replacement advertisement wasn't suitable either, because although they include the clarifier of "up to" when describing achievable speads, the clarifier was not written with the same font size.

Finch argued that the injunctions issued on the telco shouldn't be based on Optus' current advertising, given that the ACCC had not brought about a case based on those ads. He also said that civil penalties should not be applied to the company if the telco puts out advertisements correcting the original misleading ad campaign.

"The order should be in terms of advertising," he said. "We submit advertising is appropriate because the complaint to the ACCC was regarding the ads, not regarding conduct to supply broadband service."

"The ACCC formulation goes beyond advertising," he added.

Optus has been ordered to pay all court costs.

Justice Perram is expected to decide on injunctions later today and the case is expected to be finalised by Friday.

(Front page image credit: Gavel image by bloomsberries, CC BY-ND 2.0)

Updated at 11:08, 22 November 2010: The ACCC had issues with Optus' Supersonic and Think Bigger advertisements, instead of a Superfast campaign.