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.

The Senate Standing Committee on Economics has received, and noted, strong submissions that part of the proposed new unfair contracts law can’t be right. 

But so what ?  The Committee majority finds no fault with the reasoning of law Professor Frank Zumbo, or the Consumer Action Law Centre … but it has still rubber stamped the Bill, virtually guaranteeing its passage into law.

And yes, the problem wording is the part we described as the Bill’s ‘bonkers bit’ back in June 2009.  It’s disappointing that the Senate Committee system hasn’t been able to deliver a sensible outcome.

The problem

We described it at length in an earlier post.  But in a nutshell, it’s this:

The new law will say that a contract term is unfair if it creates imbalanced rights or obligations without good reason.  And it goes on to say that in assessing that, the court must consider how ‘transparent’ (i.e. clear and obvious) the term is.

So the exact same imbalanced term, effectively forced by the exact same dominant supplier on the exact same customer with the exact same minimal bargaining power might be (a) unfair, if it is on page 21 of the contract in ordinary print but (b) fair, if it is on page 1 in bold type.

How does the page, or font size, affect whether a term creates imbalanced rights ?  How do they affect whether there’s a good reason for including an imbalanced right ?  It is, as they say in the classics, a non sequitur.  Transparency forms no part of the definition of ‘unfairness’ offered by the Bill.  So how can it be a factor in deciding if a certain case falls within the definition ?

The Zumbo view

Associate Professor Frank Zumbo submitted to the Committee:

… That the bill’s reference to whether or not a contract term is transparent in section 3(3) should be deleted. As with the ‘detriment’ provision, he argued that the test for transparency should be distinct from whether or not the contract term is unfair. Indeed, he argued that a contract term may be transparent but drafted by the larger party in a way that represents a significant imbalance in contractual rights of that party and which goes beyond what is reasonably necessary to protect its legitimate interests.

Consumer Action Law Centre view

Consumer Action Law Centre submitted:

… That the transparency clause is ‘the only part of the Bill’s definition of ‘unfair’ that was not in the MCCA-agreed model for UCT provisions and was not foreshadowed in the consultation information paper of February 2009′. The two other matters in subsection 3(2) of the bill – detriment and the contract as a whole – are both ‘reasonable and in accord with the MCCA model’.

The Centre explained that the unfair contract laws are a negotiation problem (a substantive issue), not a disclosure problem (a procedural issue). In this context, the availability, legibility and presentation of contract terms is irrelevant: the key obstacle is the inability of consumers to negotiate the terms of standard form contracts proposed by suppliers.

The Centre feared that despite the government’s good intentions in introducing the ‘transparency’ test, the test may substantially undermine the operation of the provisions. It could mean that the courts will regard a term as:

…’less unfair’, and thus possibly not unfair at all, if it has been clearly typed out in the contract, regardless of whether it is realistic to expect the consumer to have read, understood or negotiated over that contract term, and regardless of the extent of the unfairness of the content and effect of that term. Despite the EM’s statements, the provision is not drafted in terms of a court being required to take into account the extent to which a term is not transparent but the extent to which it is.

The majority Committee position

Professor Zumbo and Consumer Action Law Centre are plainly correct on the transparency question.  The Committee majority didn’t find otherwise.

But some Senate Committees have a real brief to critique, while others seem to consider themselves a rubber stamp.  In this case, the majority simply approved the Bill, including this obvious mistake.

The minority Committee position

Senators Alan Eggleston and Barnaby Joyce made some separate comments of a rather confused kind:

In relation to … whether a term is ‘transparent’ in the context of matters to which a court must have regard in deciding whether a term is unfair, Coalition senators are attracted to the arguments of the Consumer Action Law Centre and Professor Frank Zumbo that the “transparent” element is superfluous in this clause and should be removed.

Coalition senators recognise that difficulty and unease these concepts have caused from the evidence of a number of witnesses. We are however satisfied, based on the UK and Victorian experience and Treasury and other evidence, that these elements, in their context of “matters to which a court must have regard,” are not impassable.

Coalition senators note with satisfaction that the experience in the UK is that the key role in enforcement of the UK Regulations has been with the regulator and not the courts.

As far as we can tell, they ended up in support of the majority position, although if the final paragraph means what it seems to (that Parliament needn’t worry so much about how an Act directs courts if it considers that there won’t be many court cases, because a regulator will sort most things out), the Senators need their mouths washed out.

One logical and strong position

It was up to independent Senator Nick Xenophon to stand up for logic in legislation:

Courts’ consideration of … ‘transparency’

As it stands, courts have the discretion to consider all aspects of cases before them, and should not be constrained to focus on ‘transparency’ and ‘detriment’ specifically when it comes to determining whether or not a contract is unfair. The mandatory requirement for the Court to focus on transparency and detriment will require the court to address these specific questions and will effectively turn these mandatory requirements into tests in themselves and in a manner that negatively impacts on the consumer.

National Legal Aid argues that the concept of ‘transparency’ implies that consumers are able to make informed choices about contract terms, however it stated in its submission that their case work would suggest the opposite.

… because most consumers do not read contracts – most rely on a notion that traders will act in a fair and reasonable way when it comes to enforcing their rights. Even when they read contracts, consumers do not often understand how a particular clause will operate in practice. And, even when a contract is read and understood, standard clause contracts are nonnegotiable – it is a falsity to think that consumers can somehow bargain their way through amending or deleting a clause in a contract that is unfair but transparent.

Associate Professor Frank Zumbo also argued in his submission that a term can be considered ‘transparent’ but may still be ‘unfair’.

…on the simple, but objective basis that the larger party’s bargaining power allows the larger party to draft and impose a contract term in such a way as to (i) represent a significant imbalance in the contractual rights and obligations in the larger party’s favour; and (ii) in a manner that goes beyond what is reasonably necessary in order to protect the legitimate interest of the larger party.

Our take on it

It seems to us that this was an extreme case of law making gone wrong. 

• The transparency ‘test’ forms no logical part of the definition it is supposed to test for.
• That problem was clearly pointed out to the Committee.
• So were its practical consequences.

But somehow, it was all OK by everyone except Senator Xenophon.

Last December Optus incurred customer wrath, effectively torpedoing mobile access to cheap international VoIP services by charging them at international rates. 

At the time, Optus insisted that:

International calls within the meaning of your Optus Mobile Standard Form of Agreement for all Timeless and Cap plans includes calls that re-route or divert to international numbers.

CSP Central asked Optus to tell us where the SFoA said that.  We couldn’t be sure – because the document is a confused mish-mash – but as far as we could tell it said no such thing.

Apparently Optus didn’t feel too sure of its grounds, either.  So it has bolted on a powerful, unbalanced  new contract term that is sure to attract the interest of consumer regulators who have unfair contract terms legislation in their armory.  Today, that’s only Victoria.  On 1 January 2010, it will be every Australian State and Territory, and the ACCC.

The new Optus contract term

The following little gem has been added to Optus’ standard terms:

5.2A  Blocking Calls
Effective 12 August 2009, we may block access to a number (other than an emergency service number) if we reasonably require this to be done for technical, operational or commercial reasons.

Seems pretty rude, to us

It’s the ‘commercial reasons’ that trouble us most. 

It’s a ‘commercial reason’ to block a particular number that it relates to a service that competes with Optus. 

It’s a ‘commercial reason’ to block access because the number represents a call type that is unprofitable for Optus.

For many purposes, the word ‘commercial’ can reasonably be translated as ‘money making’.  That’s not a cheap shot.  ‘Commercial real estate’ is real estate used for money making purposes.  ‘Commercial loans’ are financial arrangements made to facilitate money making activities.

So substitute that for ‘commercial’ in Optus’ new term and you get:

5.2A  Blocking Calls
Effective 12 August 2009, we may block access to a number … if we reasonably require this to be done for … money making reasons.

It’s a pretty unbalanced and unreasonable power to have, unless Optus can explain what legitimate interest it is necessary to protect.

Unbalanced and unreasonable equals illegal

Under the new national unfair contracts law, due to take effect on 1 January 2010, a term in a standard form contract that is (a) seriously unbalanced and (b) not reasonably necessary to protect a legitimate interest is void.  And the onus of showing the legitimate interest will lie on the party that benefits from it.

Back in January, we were asking Dear Optus, please show us where the supposed definition of international calls could be found.  Now, we’re asking What legitimate interest of Optus justifies a power to block access to numbers for unspecified ‘commercial’ reasons ?

• isn’t in the Productivity Commission report that recommended the new law
• isn’t in the Victorian law that is already in force in Victoria
• isn’t in the United Kingdom law that served as the model for Victoria’s law, and
• is bonkers.

It makes no sense.  It’s bananas.  And the Explanatory Memorandum that accompanies the Bill admits as much.

The definition of ‘unfair term’

Since the proposed law voids ‘unfair terms’, it needs to say what that expression means.  Here’s how it does that.

Meaning of unfair

(1) A term of a consumer contract is unfair if:

(a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and

(b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.

OK, that’s cool as far as it goes.  There are two conditions that define an unfair term:

• My rights are significantly greater than yours, or my obligations are significantly less.
• That disparity isn’t reasonably necessary to protect my legitimate interests.

We can understand that.  Fine.

An example

Before we get to the bonkers bit, let’s dream up an example of how that definition might work.  Let’s say that there was a court decision that ISPs could be liable to massive damages if they receive a copyright infringement allegation and don’t suspend the alleged account within 5 minutes. 

Well, every ISP would add a contract term that allowed it to immediately suspend a customer in those circumstances.

That term would clearly be ‘fair’.  The powerful and unbalanced right to suspend is necessary for the ISP to protect itself against big damages awards.  End of story ?  Would a court have to think about it a moment longer ?  Hasn’t the definition of ‘unfair’ been applied and resolved in this case ?

Well, not quite.  Thanks to the bonkers bit.

The other thing the court would have to do

The draft law directs the judge:

In determining whether a term of a consumer contract is unfair under subsection (1), a court must take into account the extent to which the term is

(a) expressed in reasonably plain language; and

(b) legible; and

(c) presented clearly; and

(d) readily available to any party affected by the term.

Think about that.  We have a term that, according to the definition in the proposed law, is not unfair.  But the poor judge can’t just say that.  She also has to consider its ‘transparency’. 

Well, what if it’s totally ‘non-transparent’ ? 

What does she do ?  What can she do ?  She has already concluded that the term ‘is reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.’  If she also decides it was ‘non-transparent’ is she obliged to reverse the result ?  Does lack of transparency have the effect that it is ‘not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term’ ?

‘I am satisfied that that the term is reasonably necessary to protect your legitimate interests’ she says.  ‘But it isn’t presented clearly.  So now I rule it is not reasonably necessary to protect your legitimate interests.’ 

Get it ?  A factor that is not part of the definition, but (for bonkers reasons) is described as a mandatory consideration, changes the outcome.  If it can do that, why is it not part of the definition of unfairness ?  If it can’t, why is it mentioned at all ?

Why is it so ?

Bonkers logic lead to bonkers results.  Imagine this … We introduce a law that says:

• You must not say rude things to tram drivers.
• In determining whether person has been rude, the court must have regard to the direction of travel of the tram.

You see, the direction of the tram isn’t an element of rudeness.  It’s like saying ‘to decide if a person is tall, the court must have regard to whether it is Tuesday.’  There’s just no logical connection.

And here’s the punch line:  the Explanatory Memorandum admits the nonsense

Transparency, on its own account, cannot overcome underlying unfairness in a contract term. Furthermore, the extent to which a term is not transparent is not, of itself, determinative of the unfairness of a term in a consumer contract and the nature and effect of the term will continue to be relevant.

Translation:

• The clearest, most readable, most transparent wording cannot make an unfair term fair.
• Obscurity, complexity and non-transparency don’t make a fair term unfair.

So here’s the question …

What the hell is the transparency ‘factor’ doing in the Bill ?   If the legislators want to say that obscure terms can be unfair – purely because of their obscurity and no other factor – fine.  But don’t say that the only test is reasonable necessity for the term to exist, but then direct judges to consider ‘transparency’.

That’s good, but not good enough.  The really red hot misrepresentation has been removed from the document but it’s still likely to mislead consumers.  It’s a good example of misleading by what you don’t say.

The two statements compared

Here’s the original misrepresentation:

21.3 If your mobile is no longer under warranty and you are not covered by insurance you will need to pay for the cost of the repairs.

That’s a ‘legal lie’.  We’ve explained why, and so has ACCC.

Here’s the latest version of clause 21.3, together with the clauses that precede it.

21. Warranty

21.1 Early Life Failure (ELF)

The Elf warranty covers mobile phones in the first 14 days of use. If the mobile phone fails during this time, this warranty provides for a replacement mobile. Please check the warranty documentation that came with your mobile phone to see if it’s within the ELF period. If you are eligible to make a claim, please contact the place of purchase immediately.

21.2 Manufacturer’s warranty

The equipment we supply is covered under the Manufacturers warranty. Details of the warranty are included with your mobile phone. (Most mobile phones come with a 12 month warranty and a 6 month warranty for batteries.)

Please note warranties do not cover physical, liquid or sun damage or unlocking or programming. Additionally they do not cover loss or theft.

If your mobile phone is older than the ELF period, check the warranty documentation for information on the standard manufacturers warranty and for their recommended local service centres. Remember to take a copy of your Proof of Purchase to the service centre and remove your SIM card and /or accessories.

21.3 For information on your local service centres recommended by the mobile phone manufacturer, please see the documentation that came with your mobile phone, alternatively refer to your local directory for more information.

So TPG has replaced the legal lie with very different wording, that seems more reasonable.  But let’s consider the overall effect of clause 21 as it now stands.

The new clause 21

The problem with clause 21 is that it reads as though it is an exhaustive statement of the customer’s warranty rights.  It doesn’t say in black & white that the ELF warranty and the manufacturer’s warranty are the only warranty rights a customer has, but that’s the natural impression it conveys.

How many Mums, Dads and teenagers are going to read clause 21 and say to themselves, ‘Oh but I am also aware of my non-excludable consumer warranty rights pursuant to the Trade Practices Act, and I therefore note that my provider’s warranty clause can legally only enlarge those rights and cannot be taken to limit them’ ? 

No, average folks are quite likely to take clause 21 as a full statement of their rights.  And it isn’t.

The impression reinforced

Note the way that clause 21 is worded to disassociate TPG from the handsets it supplies. 

The law says that a customer who gets a phone from TPG can require TPG to take it and repair / replace it if it turns out to be sub-standard.  Sure, TPG might ask you to drop it in to a third party service centre, and you might be happy to do so.

But TPG can’t say or imply that ‘If your handset is sub-standard, it’s between you and the manufacturer.’  Yet that’s the clear implication of the new clause 21.3, especially when read together with clause 21.2.

ACCC is concerned about this kind of misrepresentation

TPG’s original clause 21.3 was a howler.  The amended version is not as outrageous but it is still likely to mislead.

Less than a month ago, ACCC took action against electrical goods importer GAF for exactly this kind of thing.  In that case, Chairman Graeme Samuel made ACCC’s attitude clear:

The ACCC was concerned that in purporting to describe consumers’ express warranty rights, GAF had produced a card which could potentially lead a consumer to erroneously believe they had no other rights – most importantly the statutory rights implied by the Act into consumer transactions.

Although suppliers of products can provide their own express warranties that enlarge a consumers’ warranty rights, they must not exclude or restrict consumers’ statutory rights, or mislead consumers about their statutory rights.  If they do, they risk breaking the law and being exposed to a criminal action.

The subject has been addressed any number of times by the Commission in the past.  Despite that, serious breaches by organisations that should know better are commonplace.  In recent months, CSP Central has pointed out breaches by:

• TPG
• Best Buy Australia
• Dodo.

Misrepresenting consumer rights is a criminal offence under the Trade Practices Act, so business and lawyers alike would be wise to study the new ACCC guide.

 The answer has some pretty serious consequences.

When the word ‘Consumer’ is used, one usually thinks mum, dad and the kids, right ? Well, its potentially more like mum, dad, the kids, the local milk bar operator, the local accountant, the local builder and the local solicitor, just to name a few under the TCP Code. So this puts a heap of contracts for telecommunications services into the contracts with ‘Consumers’ pile.

The TCP Code

The TCP Code defines a ‘Consumer’ as:

(a) a person who acquires a Consumer Product for the primary purpose of personal or domestic use; or

(b) a business or non-profit organisation which at the time it enters into the Consumer Contract:
(i) does not have a genuine and reasonable opportunity to negotiate the terms of the Consumer Contract; and
(ii) has or will have an annual spend with the Supplier which is, or is estimated on reasonable grounds by the Supplier to be, no greater than $20,000, other than a person acquiring a Consumer Product for resale.

And ‘Consumer Contract’ as:

an agreement between a Supplier and a Consumer for the supply of a Consumer Product, other than for the supply of content services by third parties who are not Carriage Service Providers.

(Note ‘Consumer Product’ includes a Carriage Service)

Fair Trading Laws

It is worth noting that state-based consumer fair trading laws, like Victoria’s Fair Trading Act 1999, contemplate ‘consumer contracts’ as being:

an agreement, whether or not in writing and whether of specific or general use, to supply goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, for the purposes of the ordinary personal, domestic or household use or consumption of those goods or services

Don’t forget

This inconsistency makes it even easier for the industry to forget its obligations under the TCP Code, not to mention those under the state-based Fair Trading laws.

Don’t get caught out !  Our tip is to carefully refer to both your TCP Code obligations and those under state-based consumer laws at the same time when reviewing your customer-facing processes.

For consumer and small business contracts, that simply isn’t true.  If there’s nothing more to it, the credit management rules in the Telecommunications Consumer Protection Code preclude a CSP from immediate action.

Not much commentary required on this one … we’ll let the TCP Code speak for itself.

CSP obligations before disconnection

A Supplier must:

(a)    make reasonable attempts to Inform a Customer of a decision to Disconnect the Customer’s Service, at least 7 Days prior to Disconnection;

(b)    in Informing the Customer:

(i)    indicate the earliest date on which the Disconnection could occur; and

(ii)    include the date of issue of the correspondence, if they are Informed in Writing;

(c)    at the Customer’s request, promptly review its decision to Disconnect;

(d)    send a separate Disconnection notice, not just a Bill, in Writing to the Customer prior to Disconnecting the Service, unless the Customer was previously advised in Writing under clause 7.4.7 or 7.4.9(a);

(e)    prior to Disconnecting, make reasonable attempts to Inform the Customer and any Guarantor:

(i)    of all consequences to them of non-payment;

(ii)    that default information may be used for internal purposes;

(iii)    of any process enabling Customers to arrange a repayment plan for outstanding amounts following Disconnection, prior to the Supplier commencing external recovery or legal action;

(iv)    in Writing that:

(A)    their telephone number may no longer be available after Disconnection;

(B)     default information may be disclosed to external parties or a Credit Reporting Agency;

(C)     the debt may be referred to an external collection agent; and

(D)     legal action may be taken to recover the unpaid debt.

Got it ?  Instant disconnection is not a standard option.

CSP obligations before suspending or restricting service

A Supplier:

(a)    may only Suspend or Restrict a Service without Informing the Customer if the Supplier:

(i)    assesses that the Customer or the account status presents an unacceptably high credit risk to the Supplier; or

(ii)    reasonably suspects Fraud or attempted Fraud.

And in case you were wondering:

‘Inform’ means advise:

(a) in Writing; or

(b) verbally and confirm and record to provide an auditable record.

‘Writing’ means a document sent by the Supplier to the last known:

(a)    address; or

(b)    email address or facsimile number the Customer has agreed to use instead

of the Customer or, where relevant, the Guarantor, in the Supplier’s records.

So there’s a lot more to it than (to paraphrase some ‘knowlegable’ Whirlpool user) if you don’t pay on time they’re entitled to cut you off.

They’re talking about the Telecommunications Consumer Protection Code, a consolidation of six previous codes that had become topsy-turvy.

3 has shown leadership by voluntarily signing up to the TCP Code.  But providers who don’t sign on the dotted line still can’t ignore it.

Signing up to a Code is largely a PR exercise

There’s no law that forces a phone or internet provider to sign the register and bind itself to the Communications Alliance consumer protection code.  But you may get brownie points for taking the extra step.

But you can’t avoid the code by not signing up

ACMA has power to direct any provider to comply with a code – see section 121 of the Telecommunications Act 1997.

After that, failure to comply is a breach of the Act, and attracts penalties of up to $250,000 for companies and $50,000 for individuals who are involved.

You’d need to behave pretty badly to put yourself in that position, but the point is that non-signatories do indeed need to keep code compliance in mind.

3 has audited its systems and taken the plunge

It would be embarrassing, to say the least, for a company to sign up for code compliance and be found guilty of a swag of breaches.  So 3 has audited its processes and is satisfied that it has robust compliance in place.

According to the Communications Alliance’s media release, Michael Young (Director, Technology and Customer Services at 3) said: ‘With the establishment of this single code, it makes it easier for 3′s customers to know their rights and ensures that 3′s business practices, procedures and staff training are in line with the requirements of this and other industry codes.’

Call a CSP Central expert of you want to know more about CA Codes and code compliance

Peter Moon has been advising on code compliance for more than 5 years.

in this second part, we look at how to effectively respond to the TIO and achieve the best outcomes.

In the first part we determined who the complainant is and what the complaint is.   Now it’s time to respond to that TIO complaint.  The way you respond can have a significant impact upon the final outcome.

The TIO isn’t quite a level playing field

Although the TIO scheme is an impartial alternative dispute resolution process, many of the investigators assume the telco / ISP is at fault, and use a number of techniques to trap unsuspecting telcos / ISPs and effectively force a complainant-friendly resolution.  Much of the time telcos / ISPs enable this because of the way they respond.

Rule Number 1

Answer the question.  Not only questions posed by the TIO but questions raised by the issue itself.

Too often we see CSPs who have responded to the TIO only to receive 6 page replies, asking further questions and repeating questions that they asked in the first place.  The cause of this is the nature of the response.  Having determined what the complaint is, a response needs to address the questions in issue and those posed by the TIO.

A proper response the first time can save a lot of correspondence going back and forward.

Rule Number 2

Keep it simple.

Too often we see responses that have been drafted, which detail the history of the Roman Empire.  It is these responses, which more often than not, raise more issues for the TIO to investigate – leading to an adverse finding against the CSP.

The best way to respond is to keep it simple.  The skill of drafting is being able to write less – less really is more.

Address the questions and claims made by the complainant in a systematic and methodical way.  It is best to support a response with a copy document attached, instead of trying to copy slabs of a document into you response.

State the point, or the response, and then refer to Exhibit A or Exhibit B and so on.  This not only makes your response more credible, but makes it easier for the TIO to easily understand the point you are trying to make.

Besides, we have seen many situations where the TIO has not properly read responses, because of their length.  This only resulted in further questions being asked, even though the response actually addressed them.

Food for thought

In summary, handling a TIO complaint should be dealt with by using a simple process and remembering basic rules:

1. Determine the complainant
2. Determine the complaint
3. Answer the question
4. Keep it simple

With these things in mind, the results you achieve should speak for themselves.