The Federal Court has today ordered Telstra to pay penalties of $10 million for making false or misleading representations to customers in relation to its third-party billing service known as “Premium Direct Billing” (PDB), following action by the ACCC.
The Court held, by consent, that Telstra misled customers and breached the ASIC Act when it charged them for digital content, such as games and ringtones, which they unknowingly purchased. Telstra admitted that more than 100,000 customers may have been affected and has committed to offer refunds to these customers.
The Court found that in 2015 and 2016, Telstra did not adequately inform customers it had set the Premium Direct Billing service as a default on their mobile accounts. If customers accessed content through this service, even unintentionally, they were billed directly by Telstra.
“Thousands of Telstra mobile phone customers unwittingly signed up to subscriptions without being required to enter payment details or verify their identity. By introducing and operating the
Premium Direct Billing service, Telstra generated substantial profits by exposing customers to unauthorised charges,” ACCC Chairman Rod Sims said.
“Telstra was aware that children were at risk of inadvertently subscribing on a family member’s phone. The $10 million penalty imposed by the Court recognises the seriousness of Telstra’s conduct. In the ACCC’s view, such conduct falls below community expectations for appropriate corporate behaviour,” Mr Sims said.
As part of this resolution, Telstra has ceased operating the PDB service entirely and will refund customers affected by its conduct. Telstra estimates it has provided refunds of at least $5 million, and it will review any future complaints in light of this action and deal with those customers in good faith. The ACCC estimates further refunds may be in the order of several million dollars.
“The ACCC is now examining the third party billing services offered by other carriers and will not hesitate to take enforcement action if we believe they are breaching the law,” Mr Sims said.
