ACCC executes perfect hit on Telstra, Optus and Vodafone
After months of secret negotiations, Telstra, Optus & Voda have rolled over and ‘offered’ ACCC a court enforceable undertaking … equivalent to court injunctions … to stamp out false advertising in the broadband and telephony industry.
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.
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2 Responses to “ACCC executes perfect hit on Telstra, Optus and Vodafone”
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Not before time.
“If the giants can do it, why can’t we ?”
Vodafone and McDonalds just got away with signing an Undertaking but NO penalty for significant SMS spam, whilst much smaller players were slammed down from between $150,000 to $15.5 mio. Where is the fairness in that?
Also, the whole discussion about PSMS barring (and eve nDEFAULT barring) is ridiculous and there is no other country in the world who ever considered to limit consumer decision power in such a radical way. Not even the Taliban would think about this…
Congratulations Mr Conroy – internet filterning, PSMS barring – what’s next? Don’t you think that a free press is also very dangerous for Australia’s citizens? What about TV and radio?
Sieg Heil!