Mythbuster: A CSP can’t change its contract instantly

Many ISP and telco contracts contain a term to the effect that the service provider can change the contract at will.  It’s normally followed up by something like ‘so you must check this T&C page frequently.’

The truth:  In consumer and small business contracts, this kind of term isn’t permitted.

A typical example

Consider these clauses, from TPG‘s current standard terms:

The Customer agrees to be bound by TPG’s Standard Terms and Conditions as displayed at the TPG Internet web site www.tpg.com.au. The Customer understands that TPG’s Standard Terms and Conditions can be amended from time to time and the Customer should visit the TPG Internet web site regularly to be aware of any changes.

Customers should note that these Standard Terms & Conditions and the additional Package Conditions may be revised at any time by way of update on the TPG Internet web site – www.tpg.com.au. Customers are bound by any revisions as at the date they are displayed and should regularly examine the current Standard Terms & Conditions and the additional Package Conditions displayed on the TPG Internet web site.

What’s the problem ?

Well, there are two.  (And if TPG operated under a Standard Form of Agreement, there’d be three.)

The relevant laws are:

• the Telecommunications Consumer Protection Code
• in Victoria, the Fair Trading Act.

TCP Code

This is a Federal code that applies to contracts between ISPs / telcos and their consumer/ small business customers.

It includes protections against unilateral and immediate contract changes.

Clause 5 of the TCP Code says: ‘A clause in a consumer contract must not be unfair.’  ‘Consumer’ is defined to include small business for this purpose.

Then it goes on to indicate kinds of terms that will be unfair, including terms that:

permit the Supplier to unilaterally amend or vary the characteristics of goods or services, including price, in a Consumer Contract with a Fixed Contract Period without:

(A) at least 21 days Written Notice to the Consumer;

and

(B) offering the Consumer the right to terminate the Consumer Contract within 42 days of the date of the notice without incurring charges, other than usage or network access charges to the date the Consumer Contract ends and outstanding amounts for installation or for equipment compatible with other Suppliers’ services.

There are limited exceptions, but the general rule is clear.  A CSP just can’t say: ‘We can change the deal instantly by changing the web site, and you remain bound by it.’

The Victorian Fair Trading Act

Part 2B of this Act is a statutory rule against unfair terms in consumer contracts.  The regulator Consumer Affairs Victoria (CAV) used this law to punch up AAPT in 2006.

CAV is convinced that a clause which allows uncontrolled unilateral variation of a contract is unfair within the meaning of its Act.  It takes an even harder line than the TCP Code on this point.  It won’t even agree to an exception for minor variations.

If CAV required TPG to change its variation term for Victorian contracts, and TPG refused, you can bet your socks that CAV would take them to court.

The AAPT decision

Victoria’s VCAT Tribunal agreed with CAV on this point.  Here’s the relevant AAPT contract term, and what the Tribunal said about it:

The AAPT term:  ‘We may vary any term of this Agreement at any time in writing. To the extent required by any applicable laws or determinations made by the Australian Communications Authority (ACA), we will notify you of any such variation.’

The Tribunal judgment:  ‘This term is unfair because it permits  AAPT , but not the customer, to change the contract unilaterally. The term has the effect of permitting  AAPT , but not the consumer, to avoid or limit the performance of the contract: see section 32X(a) of the Fair Trading Act.

AAPT  pointed to the fact that it has no mobile phone network of its own, but simply resells services supplied by Telstra, Optus and Vodaphone. Under the terms of  AAPT ‘s supplier contracts, terms may be imposed upon  AAPT  on relatively short notice, which might make it commercially necessary for  AAPT  to seek changes consequential upon new terms imposed on  AAPT.

Be this as it may, it provides no justification for a term as broad as clause 1.3, which permits  AAPT  to vary any term of the agreement, at any time, for any cause.