Telstra fined $50M over unconscionable sales to Indigenous customers

Telstra fined $50M over unconscionable sales to Indigenous customers

The ACCC instituted Federal Court proceedings on 26 November against Telstra​.

Credit: Telstra

The Federal Court of Australia has given Australia’s largest telco Telstra 30 days to cough up a $50 million penalty as result of unconscionable sales conduct relating to Indigenous customers.  

The Australian Competition and Consumer Commission (ACCC) instituted Federal Court proceedings on 26 November against Telstra for unconscionable conduct after the country’s largest telco conceded it had breached Australian Consumer Law. 

According to the ACCC, Telstra admitted it acted unconscionably when sales staff at five licensed Telstra-branded stores in Alice Springs, Casuarina and Palmerston, Arndale and Broome signed up 108 Indigenous consumers to multiple post-paid mobile contracts, which they did not understand and could not afford, between January 2016 to August 2018. 

Specifically, Telstra admitted that staff at the five stores in the Northern Territory, South Australia and Western Australia used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra.   

At the time, the telco has agreed to the filing of consent orders and joint submissions in court in support of penalties totalling $50 million being imposed by the court. However, it remained a matter for the court to decide at a later date whether these penalties are appropriate. 

Now, Federal Court judge Justice Debra Sue Mortimer, has handed down a judgment ordering Telstra to pay the proposed pecuniary penalty of $50 million within 30 days from 13 May, along with the ACCC’s costs related to the case and other expenses incidental to the proceedings.  

As previously reported, in addition to the remedies determined by the Court, the ACCC has accepted a court-enforceable undertaking from Telstra in which the telco will provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline and enhance its digital literacy program for consumers in certain remote areas. 

Telstra previously said it had taken steps to waive the debts arising from the unconscionable conduct, refund money paid and put in place steps to reduce the risk of similar conduct in the future. 

“Sales staff in these Telstra-branded stores used unconscionable practices to sell products to dozens of Indigenous customers who, in many cases, spoke English as a second or third language,” ACCC Chair Rod Sims said.

“This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”

“Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them.

“The $50 million penalty imposed against Telstra is the second highest penalty ever imposed under the Australian Consumer Law. This is appropriate given the nature of the behaviour by Australia’s biggest telecommunications company, which was truly beyond conscience,” he added.

For its part, Telstra has said it accepts the court's decision and has vowed to "rebuild trust".

"This brings an end to what has been a deeply challenging and disappointing chapter in our history and one in which we are already taking steps to fix," Telstra CEO Andrew Penn said in a blog post. "Many of the programs that form part of our undertaking with the ACCC are already well underway.

"Again, I want to apologise to all of the Indigenous customers affected by this. I am deeply and personally disappointed that we have let you down. We should have listened more carefully. We should have been more attuned to what was happening. We should have picked this up earlier," he added.

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