This Code is so big a deal that we’ve dedicated a website to it … www.tcpcode.com.au.

So head over to the TCP Code site for the info you need on this important new law.

After PC discounter MSY was stung a whopping $203,500 for misrepresenting consumer warranty rights, we expected that the tech industry would have reviewed their terms with a legal microscope.  

Not so, it seems … as we discovered when we were about to make a purchase from leading Apple vendor Computers Now.

CompNow’s T&Cs page explains:

Refund/return policy

• Due to copyright issues, opened software cannot be returned. Please verify your system requirements prior to opening the packaging.
• We will offer a store credit or exchange (but not a refund) for any unopened goods returned within 14 days of purchase.
• Goods returned after 14 days of purchase will only be accepted at the company’s discretion & may incur a 10% restocking fee.
• No refunds except in accordance with the Trade Practices Act.

What’s the problem?

Basically, the Australian Consumer Law says that if goods don’t satisfy certain basic quality and suitability requirements, the customer must be given a remedy, and in certain cases the remedy can be a return if the customer chooses that.  And where that right applies, it doesn’t matter a hoot whether the goods are software, opened or unopened.

The way CompNow’s  conditions are written reflects two failings.

First, it’s not a good look to be referring to the ‘Trade Practices Act’ well over a year since it became the ‘Competition and Consumer Act’ and considerably changed the consumer protection goalposts.  Makes it look like the trader pays little or no attention to keeping up to date re its legal obligations.

Second, it shows the danger of  treating consumer laws as an afterthought ie:

• “We can do this if we want”, and
• “We can do that if we like”, and
• “We can make this rule ‘cos we say so”
• PS “We’ll follow the law.

The first three lines create a strong impression that trader’s rules apply, and will lead many customers to think that’s how it has to work.  After all, ‘No refunds except in accordance with the Trade Practices Act’ hardly makes it clear that powerful refund rights apply in particular cases, and would totally override the first three bullet points, without question.

Is it a big deal?

We bet MSY thinks so

Here’s what the judge said in their case:

It is appropriate that it should be made plain to retailers in the position of companies such as the respondents that misrepresenting to consumers what their warranty rights are is an unacceptable form of commercial conduct and illegal. It is appropriate, therefore, to encourage retailers not to give consumers the impression either that their statutory rights are curtailed or non-existent …

So the court ‘encouraged’ MSY with orders that the MSY Group:

• pay a $203,000 fine
• be restrained for a period of five years from making false or misleading representations about a consumer’s statutory warranty rights, including in relation to the new consumer guarantees introduced in the ACL on 1 January 2011
• implement a Trade Practices compliance program
• display corrective advertising in each of their stores
• publish a corrective notice on the MSY Technology website at www.msy.com.au, and
• pay the ACCC’s costs.

So what about CompNow?

CompNow’s terms are far from the worst example of warranty misrepresentation we have seen.  But it’s just dumb for tech and telco companies not to review their customer terms, warranties and policies to ensure compliance with the Competition and Consumer Act 2010.

The ACCC has this evening announced that it has ‘declared’ Telstra wholesale ADSL services under the Competition and Consumer Act 2010.

The effect of the ACCC’s decision will be that Telstra’s wholesale customers will now be able to better compete with Telstra’s retail product offering.

The declaration is an interim access determination (which applies for the next 12 months) pending the completion of the ACCC’s final access determination.

The ACCC have announced the following pricing under the interim access determination:

Interim prices for wholesale ADSL services

Monthly charge per end-user in Zone 1(predominantly CBD and metropolitan areas)

$25.40

Monthly charge per end-user in Zone 2/3(predominantly regional and rural areas)

$30.80

Monthly charge per Aggregating Virtual Circuit or Virtual LAN acquired in connection with wholesale ADSL

To 30 June 2012: $45.50 per Mbps

From 1 July 2012: $33.65 per Mbps

An industry source claims that:

“the declared ADSL2+ price of $25.40 is just $1.40 per month more than the entry level NBN service of 12/1 Mbit/s. Given that the average speed amongst our customer base for an ADSL2+ service is around 12/1 Mbit/s, ADSL2+ delivers similar speeds with a fraction of the price with respect to aggregation as the AGVC price is only a few dollars more than NBN and there are only a handful of interconnection points rather than 121. The copper ADSL2+ network delivers hands down better value for consumers than the $48B white elephant that is NBN.“.

In 2011, ACMA pressured the telco industry to get its act together on how customers are treated.  After extended drafting and consultation phases, Comms Alliance has submitted an aggressive new TCP Code to ACMA for registration.  The question is now: Is the new draft code tough enough for ACMA?

As CSP Central has previously explained, ACMA and ACCC are not falling over themselves to approve the Alliance’s work.

Comms Alliance’s take on it

Under the admirably optimistic headline TCP Code Heralds New Era of Improved Service for Australian Telecommunications Consumers, Comms Alliance has announced:

Australia’s communications consumers will enjoy better service, clearer pricing and a far-reaching framework of strong protections under a new industry Code submitted for registration today by Communications Alliance.

The revised Telecommunications Consumer Protections (TCP) Code was approved for submission to the industry regulator – the Australian Communications and Media Authority (ACMA) – by the Board of Communications Alliance.

The revised TCP Code provides a fundamental overhaul of the previous code, with broader and stronger consumer protections across all elements of telecommunications services to consumers and small business customers in Australia.

 But ACMA isn’t promising to buy it

In a rather less enthusiastic statement, ACMA replied:

ACMA response to Telecommunications Protections Code

‘The Australian Communications and Media Authority will assess the Telecommunications Protections Code provided to us today seeking registration as the industry’s code,’ said ACMA chairman, Chris Chapman.

‘The ACMA is aware that the revised TCP code was approved today by the Board of Communications Alliance for submission to the ACMA.

‘We will consider whether the proposed industry code will deliver on the outcomes mandated in the ACMA’s Reconnecting the Customer Report.

However, we do understand that Communications Alliance have carefully considered the ACMA’s report.

‘We are under no time limit in which to assess the code although of course, we will do this as expeditiously as possible, given our focus is on materially enhancing consumer protections,’ Mr Chapman said.

So what’s the difference between the public consultation draft and the version submitted to ACMA?

In the public consultation phase, ACCC excoriated the consultation draft TCP Code.  If that’s any clue to ACMA’s thinking, Comms Alliance needed to make significant changes to the draft to allow it any chance of ACMA approval.  So in the interests of understanding what happened inside Comms Alliance following consultation, here’s an unofficial comparison version of the two proposals.  Do the changes go far enough to satisfy ACMA?

Time, as they say, will tell.

Exetel’s CEO John Linton died yesterday, and CSP Central joins with the telco industry in acknowledging his contribution to the sector.

Opinionated, outspoken, uncompromising and unrelenting, Linton was never reticent in letting the rest of us know what he thought.  But love or hate some of his opinions, he built a successful telco (with a fiercely loyal staff and customer base) in remarkably quick time, contributed to debate at many levels, and was a major benefactor of Australia’s wildlife and environment through Exetel’s generous donations to community-based programs to protect endangered species and regenerate natural environments.

Exetel’s slogan … ‘Helping make a better world’ … would be corny in the mouths of most other telcos.  But Linton meant it and lived it.

Linton suffered a major stroke in the afternoon and passed away during the evening, surrounded by family.

Vale, JL.

The jungle drums are sending negative messages about the new TCP Code proposed by Communications Alliance.  

What’s it all about?
In a nutshell, the Australian Communications and Media Authority has been calling for stronger telco consumer protections since it completed its ‘Reconnecting the Customer’ enquiry last year. In response, Communications Alliance developed an upgraded version of the current Telecommunications Consumer Protections Code, hoping it would be accepted and registered by ACMA. (That’s how industry codes become ‘legal’.)
But signs are appearing that ACMA might reject the new draft Code as being too soft … despite the fact that it is by far the most demanding code of its type that the industry has ever faced.

ACCC has its say
First, the Australian Competition and Consumer Commission lodged its own submission during the public exposure stage of the code process. In a blunt assessment, ACCC rated the new draft as too little, too late. The regulator was highly sceptical that any consumer protection system based on industry self-regulation would cure the ills that, as far as it and ACMA are concerned, plague the retail telco sector.

A knowing wink from The Age
On 8 January 2012, The Age newspaper ran a piece that reeked of a little inside information from ACMA. Nothing improper, we hasten to say, but the journo clearly has a strong feeling that the proposed new code is doomed.

So what would happen instead?
If the draft TCP Code is binned by ACMA, the authority will draft its own set of rules, called an Industry Standard. Obviously, it would make them even tougher than the proposed code, and the Standard would have the force of law under section 128 of the Telecommunications Act. Apart from other enforcement options, the Federal Court can impose penalties of $250,000 per contravention of an Industry Standard.

Good news and bad news
For telcos and ISPs that were dreading the burdens of the proposed new TCP Code, a delay in the introduction of new rules will be welcome. And an Industry Standard might omit some elements of the draft TCP Code. But overall, we have to assume that it would be significantly tougher on telco retailers than the draft code.

Often you see such clauses quoted in support of an argument that a claim for misrepresentation cannot succeed where a contract contains this clause.

But that ain’t necessarily so.  In fact, it ain’t even normally so.

‘Entire agreement’ clauses

Typically they read something like this:

This document is the entire agreement between you and us and you acknowledge that we have made, and you rely on, no promise, representation or warranty to you that is not set out expressly in this document.

What they are supposed to achieve

In theory, an ‘entire agreement’ clause prevents you from claiming that you relied on something a salesperson told you, or otherwise sits outside the document.

But the law sidesteps them with ease

The law sees it this way:  If a person was told something misleading that caused them to decide to enter a contract, then their entry into the contract was obtained ‘on false pretences’.  That taints the contract from the moment of its inception.  It is, and always was, a contract obtained by misrepresentation.

So, when the law comes to the ‘entire agreement’ part of that tainted, flawed contract it reasons that it cannot operate as its black & white words suggest it does.  It simply won’t be enforced so as to wipe out the misrepresentation.

So are ‘entire agreement’ clauses irrelevant ?

No, they can have effect.

In deciding whether a person was induced into entering a contract by some external misrepresentation, the court must decide:

• what was actually said or otherwise represented
• whether it was true or false
• if it was false, whether the person would not have entered the contract has they known the truth.

This third element, often called the ‘reliance question’, is frequently overlooked by lay people.  They think that they can avoid a contract if they can show there was a misrepresentation leading up to it.  But they need to show more: they must show that they relied on the misrepresentation as a material factor in entering the contract.

A court can take an ‘entire agreement’ clause quite seriously as evidence that a person did not rely on some external representation.  It can say ‘We accept that a misrepresentation may have occurred, but in judging whether you relied on it we give weight to the fact that you signed a piece of paper saying that you didn’t.’

A high water mark example

Let’s say you sign a short contract after getting legal advice, and it contains a clear ‘entire agreement’ clause.  A court might well say:

• it’s a short contract
• the clause is clear
• you obtained legal advice
• you actually signed the document
• you must have very clearly considered the clause and chosen to assent to it -

so we are satisfied that you did not rely on the external representation you now complain about.  We accept that it was made, and that it was untrue.  But in all the circumstances including the ‘entire agreement’ clause, we don’t accept that you relied on it.

An example at the low water mark

At the other end of the scale, let’s say you sign up for a mobile phone service in store.  The provider uses a Standard Form of Agreement, which you don’t actually see before signing up.

Even if you did see it, it would be dozens of pages long and the ‘entire agreement’ clause is buried on page 24.

The only ‘advice’ you get about the deal is from the commission salesperson.

In those circumstances, if you can later point to a material misrepresentation, the court will sidestep the ‘entire agreement’ clause in a blink.  You did not carefully and consciously assent to the proposition that there was nothing more to the deal than what’s in black & white.

Section 18 of the Australian Consumer Law

This must be the most quoted piece of consumer law on CSP Central.

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

In virtually every section 18 claim that involves a contract, there is an ‘entire agreement’ clause.  If such clauses could lock out misrepresentation claims, there’d be very few contract cases based around section 18.  (You should be aware that, until 1 January 2011, a nearly identical provision appeared in the old Trade Practices Act 1974, which has since been upgraded and re-named the Competition and Consumer Act 2010.)

But just take a stroll through these cases and you’ll see how many there have in fact been.

Myth busted

‘Entire agreement’ clauses can be important and effective.  But especially in consumer situations where the deal moves fast, the contract is not focused on and there’s no independent advice, they are no sure defence to a misrepresentation or section 18 claim.

We are currently working on a new and improved CSPCentral and hope to relaunch during 2012.

Feel free to contact us with any queries.

Best Wishes

The CSPCentral Team

The Information Paper has been developed to assist ISPs and Telcos in ensuring that their advertising for mobile and wireless internet is compliant with the Trade Practices Act 1974, and in particular the consumer protection provisions such as s52.

In launching the Information Paper, ACCC Chairman, Graeme Samuel said that:

“The ACCC is concerned by companies over-promising and under-delivering the speeds available on mobile and wireless internet, particularly in the context of network upgrades and increasing wireless internet subscriptions,” “This Information Paper is intended to assist the whole industry – mobile and wireless internet retailers, resellers, and network owners – to comply with the law.”

The ACCC has warned ISPs/Telcos not to advertise terms such as ‘maximum’, ‘up to’ or ‘peak network’ speeds, “if those speeds are not generally achievable or likely to be achieved by consumers using the network.”. The ACCC warning indicates that it is taking a similar approach to that previously taken with ADSL2+ advertising.

The ACCC has expressed the view that ISPs/Telcos should:

1. only make speed claims based on ‘appropriate tests of network performance’ to show speeds that can generally be achieved; and
2. prominently state the factors affecting mobile and wireless internet speeds such as congestion, location, and other variables.

The Information Paper also contains an Industry Checklist to assist with compliance – ISPs/Telcos are reminded that they should also remember to ensure compliance with CommsAlliance Code C628:2007 TCP Code (Prices Terms and Conditions). Significant effort must be applied in light of the ACCC’s warnings and recent actions in securing enforceable undertakings against some of Australia’s largest ISP/Telcos.

When legal advisers warn second and third tier telcos and ISPs about advertising content, the single most common retort is ‘Telstra gets away with it’ and ‘We saw an Optus ad like that’ and ‘But Voda says the same thing’.

It’s a pretty good argument.  If the giants can do it, why can’t we ?

No mistake, this is the biggest telco-truth-in-advertising hit ever landed by the national regulator.  Like all good commando raids, it seemed to come from nowhere.  Only yesterday morning did rumours start to circulate that ‘something big’ was coming out of Canberra in the next 24 hours.

If Tiers 2, 3 & 4 don’t get their act together now, they can’t complain they’re being picked on.  And ACCC has made sure that Telstra, Optus & Voda are motivated to keep their networks honest.

The Undertaking:  a summary

ACCC Chairman Graeme Samuel

Here’s what it says in a nutshell:

• The Trade Practices Act prohibits misleading advertising.
• It also prohibits advertising part of the price of a product, but not the whole price.
• ACCC thinks the comms industry in general has an advertising problem.
• ACCC thinks the industry in general has engaged in advertising that:
  • uses misleading headline pricing
  • misuses the word ‘unlimited’
  • misuses phrases like ‘no exceptions’
  • falsely uses words like ‘free’
  • misrepresents price per minute
  • features pricing that only applies in bundles
  • misrepresents data allowances
  • exaggerates broadband speeds
  • exaggerates coverage areas.
• ACCC thinks that Telstra / Optus / Voda are each guilty of one or more of the above.
• Everyone acknowledges that Telstra / Optus / Voda might have their own opinion about a particular instance, and it would be up to the court to decide.
• Because they’re market leaders and want to set a new standard for telco-truth-in-advertising, Telstra / Optus / Voda give an enforceable undertaking to ACCC.
• Telstra / Optus / Voda undertake to desist from any new advertising of the kind described above.
• Within 30 days, they’ll review current ads to see if any offend.
• Within a further 60 days, they’ll cease any that does offend.
• Within 60 days, they’ll confirm to ACCC that they have complaints systems that give redress to customers who are misled.
• Within 60 days, they’ll give redress to all customers with an unresolved complaint about misleading advertising (no more than 12 months old) by a customer who can show a good faith case.
• Within 60 days, they’ll review their trade practices compliance programs to ensure that the targeted advertising issues are under control.
• They’ll report to ACCC on advertising that has been dropped and consumer redress granted.
• They’ll make sure that future ads about headline prices, terms or representations accurately reflect the deal that most of the target audience can expect.
• They’ll make sure all their subsidiaries follow the same rules.
• The undertaking lasts for two years.

Is that all there is ?

No, it isn’t.

ACCC is well aware that:

• hundreds (or thousands) of resellers resupply Telstra / Optus / Voda services, and
• Telstra / Optus / Voda have substantial practical control over how they behave.

So:

• Telstra / Optus / Voda must take reasonable steps to ensure that their resellers follow the telco-truth-in-advertising undertakings.
• Within 30 days, Telstra / Optus / Voda must write to them all to tell them all about it.

A purely voluntary offer by Telstra / Optus / Voda ?

Possibly, but we’d bet a lot more money on the Geelong Football Club winning Australian Idol singing ‘Nessun Dorma’ a capella in five part harmony.

In its media release, ACCC is very positive about the role of the Big Three, saying they are to be ‘applauded’.  We think that’s diplomacy.  Obtaining this undertaking from three massive telcos would have involved more than ACCC explaining the warm glow of good citizenship.  Plainly, the companies were convinced they were at risk of stronger action if they did not agree.

ACCC itself has said about enforceable undertakings:

The Commission stresses that it seeks to resolve matters under s. 87B only when it believes that a breach has occurred or is likely to occur and that an administrative resolution based on enforceable undertakings offers the best solution.

What does it mean ?

Lawyers for Telstra / Optus / Voda have been restricted to damage control.  There’s no two ways about it:  ACCC has convinced all three companies that it could ‘slot’ them for Trade Practices Act breaches, and the best way out was to roll over.

Watch out for Telstra / Optus / Voda spin that they reckon it’s all a good thing and were always deeply committed to the same principles.

Sure.

ACCC has a history of being gracious in victory in these situations, so we don’t expect them to taunt the losers.  But make no mistake, this is a complete capitulation by Telstra / Optus / Voda.

And what’s an ‘enforceable undertaking’ ?

It’s similar to being under a court injunction.

Under section 87B of the Trade Practices Act 1974:

• ACCC may accept a written undertaking given by a person in connection with a matter in relation to which ACCC has a power or function under the Act.
• If ACCC considers that the person who gave the undertaking has breached any of its terms, it may apply to the Federal Court for an order.
• If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders:
  • an order directing the person to comply with that term of the undertaking;
  • an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;
  • any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;
  • any other order that the Court considers appropriate.

This undertaking builds in a short ‘please explain’ procedure, to give the telcos some opportunity to resolve issues early.

By the way, the wording of the TPA explains why the Undertaking has been ‘offered’ by the telcos and ‘accepted’ by ACCC.  You’ll see from above that this is the only way the TPA allows an Undertaking to be created.

The next part of the play

Telstra / Optus / Voda have rarely been the worst offenders in CSP advertising.  Resellers often far outdo them.  While the undertaking doesn’t bind the resellers, it sets up a two pronged attack against them.

• Telstra / Optus / Voda have undertaken to ‘take reasonable steps to ensure that the obligations outlined in paragraphs 32 and 33 of [the] Undertaking are applied’.
• ACCC will have its usual weapons available.

Frankly, we’re not sure which resellers need be more alarmed about:  ACCC with its potent TPA weaponry or Telstra / Optus / Voda with their brutal, arbitrary reseller contracts.  If Telstra / Optus / Voda really want to clean up the reseller channels, they can do it in weeks.  They lord it over their channels.  They can rapidly assert their will over them.

And who are the ‘resellers’ ?

The undertaking doesn’t actually refer to ‘resellers’.  It refers to ‘any party with whom [Telstra / Optus / Voda] has a commercial agreement that allows it to control the advertising and promotion of goods and services by that party’.

Now, Telstra / Optus / Voda have been on a power trip for years.  Their contracts routinely give them every power known to woman, man or beast.  The lawyers have basically been instructed ‘Make them sell us their souls’.

So in many cases, parties that fall under the description ‘any party with whom [Telstra / Optus / Voda] has a commercial agreement that allows it to control the advertising and promotion of goods and services by that party’ will include large scale wholesale customers.  And for all such customers, Telstra / Optus / Voda are assuming responsibility to ‘take reasonable steps to ensure that the obligations outlined in paragraphs 32 and 33 of [the] Undertaking are applied’.

What an ACCC coup.  Telstra / Optus / Voda forced to use the powers they have forced on other companies, for ACCC purposes.

But for once, the regulator hasn’t shot the messenger

For too long, regulators have ignored the reality of the Australian communications industry:  that combo retailer / wholesalers effectively force downstream operators into dodgy practices.  How can TinyTel, as a Telstra / Optus / Voda reseller, conduct itself squeaky clean if Telstra / Optus / Voda doesn’t ?

What next ?

ACCC Chairman Graeme Samuel has already said that second tier operators can expect to be contacted soon, with a request to commit to the principles of the principles of the advertising undertaking.

“The ACCC recognises there is more to do. The ACCC will now contact the next tier of operators who will be encouraged to adhere to the principles set out in the undertaking. When taken together with the three major carriers, this would then account for almost 90 per cent of the market for telecommunications goods and services in Australia.”

And FunnyTel has the last laugh

As always, Australia’s rising telco star FunnyTel was miles ahead of the industry on the truth-in-advertising push.  The company’s new FAT plan announcement is sure to score a big elephant stamp from ACCC.

Chad Blake, Manager (Legal Affairs & Hospitality) at Funnytel, told CSP Central:

We’ve never really worried about Telstra, Optus or Vodafone.  ‘Don’t sweat the small stuff’, says our CEO Steve.  We confidently expect to acquire all three of them within the next 18 months, as FunnyTel’s stellar growth continues, and Steve works out a way to buy millions of instant scratchies using BarterCard.