The telecommunications industry has been given a slap on the wrist and a stern warning after the Australian Competition and Consumer Commission took action against DirectLink Communications.
The action was taken on DirectLink's selling program between July and September last year. The company offered to pay bonuses to consumers if it recruited new participants. The business was selling long-distance services for Global One to home and business users.
ACCC chairman Allen Fels said consumers would be given refunds from DirectLink. "The ACCC concluded that these recruitment bonuses breached the prohibitions against referral selling and pyramid selling in the Trade Practices Act," Fels said. The Act prohibits schemes where participants are paid for recruiting new participants.
Jonathan Soon, DirectLink's managing director, says the situation has been fixed and the company has signed an undertaking with the ACCC to prevent further incidents.
Since the ACCC's action, DirectLink has changed its business practice. Soon has signed an undertaking with the ACCC to refund all the dealers that had joined on the basis of receiving the bonuses. It costs $180 to become a DirectLink distributor.