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 ?

To demystify the topic, here’s a dowloadable SFoA backgrounder that overviews what they are and why they can improve CSP business processes, with the compliments of CSP Central and Logie-Smith Lanyon Lawyers

You should also check out this post about complying with the SFoA Summary notification regime.

In this case, the clarity (or otherwise) of the contract documents matters more than most.  Optus is basing a controversial decision to deny Timeless or Cap plan customers access to cheap VoIP calls on a claim that its standard contract is quite clear about it.

 
No cheapie calls via our network, says Optus

Until Christmas, Optus Timeless or Cap plan customers could use their mobile or landline accounts to dial the Australian number of a VoIP service provider.  Optus carried the call as far as the VoIP service, and the VoIP service provided an IP link to an international number at low cost.

Then came the SMS from hell:

IMPORTANT:  All calls that re-route or divert to international numbers are charged at 29c per min + 27c flagfall.  See optus.com.au/international for details.

So we checked out optus.com.au/international for details

Here’s how Optus explains its purported right to block access to third party VoIP services that allow customers to use a local or national Optus call as the first stage of a cheap international connection:

Optus is concerned that some customers may be being misinformed or misled by non-Optus related entities that are making claims that Optus customers can make free, or included cap value, international calls on their Optus Plan. This is not correct. 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.

If you are on a Timeless or Cap plan, all calls made to any number that re-routes, diverts or switches to an international number is an international call and is charged from 29c per minute with a 27c flagfall. International calls are not included as part of your Timeless unlimited offer, and are excluded from some Cap plans included value. A complete copy of the Standard Form of Agreement can be viewed at www.optus.com.au/sfoa

Now, that may be true.  But if that’s what the standard agreement says, we can’t locate it.  No surprise since the contract documents comprise a bevy of separate components.

We even googled the entire Optus site for the word ‘re-route’ but could turn up just four results, none of them relevant.

Optus had better hope its assertion is correct

Even if Optus is right about ‘international calls within the meaning of your Optus Mobile Standard Form of Agreement for all Timeless and Cap plans’, there are questions about the conscionability of its exercise of power.

And if Optus is wrong  it has made a nasty mistake indeed. 

So give us a hand, Optus

We’re not saying you’re wrong, but in the jumble you describe as ‘a complete copy of the Standard Form of Agreement’, the term that ‘If you are on a Timeless or Cap plan, all calls made to any number that re-routes, diverts or switches to an international number is an international call’ isn’t easily found.

Where is it, please ?

Worse, you may commit a criminal offence under the Trade Practices Act – of misrepresenting peoples’ legal rights.

Dodo’s most recent brush with the law caused us to take a look at its ‘liability limitation’ clause.  All we can say is ‘Wow !’  What planet’s legal system generated this weird stuff ?

First, a refresher

Before we go any further, let’s re-read an earlier article about liability limitation.

Next, take a look at Dodo’s clause

As Your service is provided to You for the primary purpose of personal use, We do not accept liability for losses that result from the use of Your service in connection with the conduct of a business.

We are liable to you for breach of contract or negligence.

However, We will accept that liability if it cannot be excluded under any legislation.

If that liability cannot be excluded but can be limited under any legislation, We limit Our liability to resupplying, repairing or replacing the relevant goods or services, or payment of the cost of resupply, repair or replacement, where it is fair and reasonable to do so.

What did they get wrong ?

Umm, this is a hard call.  Which do you rank first … the potential criminal offence or the apparent omission of the word ‘not’ ?

Let’s start with the potential offence

The statement that ‘As Your service is provided to You for the primary purpose of personal use, We do not accept liability for losses …’ is bizarre.  From our earlier article, you’ll understand that the ‘primary purpose’ of supply is as relevant as Dodo’s left foot.  Dodo can’t deny liability for a service it provides on that basis.

It just isn’t lawful to (try and) do that in Australia.

And trying to do it may breach section 53(g) of the Trade Practices Act:  ‘A corporation shall not, in trade or  commerce, in connexion with the supply or possible supply of goods … make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.’

Section 75AZC of the TPA goes on to make that an offence … with a maximum penalty of over $1 million.

Now let’s look at the ‘not’ problem

It’s pretty obvious that Dodo did not mean to say ‘We are liable to you for breach of contract or negligence.’  The next sentence reads:  ‘However, We will accept that liability if it cannot be excluded under any legislation.’  You don’t begin a sentence with ‘However, we will accept that liability’ when the previous sentence already says ‘We are liable to you for breach of contract or negligence.’

It looks like some careless dork has left out ‘not’.  Maybe it was intended to say ‘We are not liable to you for breach of contract or negligence.’  Then it would make sense for the next sentence to begin with ‘However, We will accept that liability …’.

And there’s a second, different liability clause in the same document

We won’t dwell on it, but there’s a second clause about liability that works differently.  It also mis-states the law, though.

Our take on it

If anyone takes Dodo on in court, claiming heavy losses, the company will have to rely on a court reading this mish-mash with sympathy.  Good luck, Dodo.

The smaller the company, the more likely it was to get the requirement wrong.  But Adam Internet, Crazy John’s and Soul Mobile all got it wrong, too.

The benchmark requirement

We wanted something so simple and clear that it doesn’t take a law degree to get right.  So we chose clauses 5 and 6 of the Telecommunications (Standard Form of Agreement Information) Determination 2003.

Under this Determination, a CSP with a ‘Standard Form of Agreement’ under Part 23 of the Telco Act is required to offer a summary of the contract in a particular format.

Clauses 5 and 6 simply say:

• The summary must include the heading ‘Important Customer Information: Your Rights and Obligations’ or equivalent.
• The heading must be in a prominent position.
• If the heading is not in a colour that’s different from the rest of the summary, it must be bolded and at least two points larger than any other typeface.

Is that so difficult ?  It was for our test selection.

Our method

• We chose 36 CSPs pretty much at random by googling ‘sfoa summary’.
• We located the online version of their summary via the Google results.
• We checked for compliance.

The results

We awarded ‘passes’ only to CSPs that got everything right.  Several others were very close, but after choosing such a simple test we thought it was fair to adopt a strict standard.

• Some CSPs omitted the required heading completely.
• Others used the same font size and colour as other headings in the document.
• One just used body text, and located the heading very ‘non-prominently’.
• One used larger text, but didn’t bold it.

Full results are set out at the foot of this post.

What’s going on here ?

We doubt that ACMA will be keelhauling the CSPs over this issue.  But we’re mystified as to why such a simple, clear regulatory requirement trips up so many players.

Maybe there’s just too much regulation for CSPs to cope with.

Full results

Are you compliant ?  Can you prove it ?

Here are some hints for getting it right.

There’s more to an SFoA than an SFoA

There are several good reasons to use an SFoA instead of individual customer contracts.  But the convenience comes at a cost.  For instance, you must comply with the Telecommunications (Standard Form of Agreement Information) Determination 2003.

The Determination requires that a CSP with an SFoA:

• creates a summary of it in a specific form
• gives the summary to ACMA
• makes any changes ACMA requires
• gives customers a copy of the summary at the start of the contract
• gives them a reminder notice about it every two years.

New customers must receive a copy of the summary

The Determination requires you to give a copy of the summary at the time of first supply, or a.s.a.p. afterwards.

Permitted methods of delivery

• personal delivery
• post to address in your records
• email, if the customer has agreed to receive notices at that address
• it is OK to send it with a bill or other document, by one of the above methods.

What about notice by hyperlink ?

We’re often asked whether you can send an SFoA summary as a hyperlink in an email – assuming the customer has agreed to receive notices by email.

The Determination doesn’t allow for it, but the Australian Communications Authority (which has since become ACMA) informally agreed that this was an acceptable practice as long as the hyperlink is direct to the document itself and not merely to a web site where the customer can find the document.

We think this position would apply with ACMA today.

What if you don’t give the copy ?

The customer remains a ‘new customer’ for the purposes of the Determination until they have received the summary.

So the obligation to send it never goes away.

Existing customers must receive a notice about the summary, each 24 months

No less often that each 24 months (starting on the date they received the original copy of the summary) a customer must receive a particular notice about your current summary.

This is where many CSPs fall down.

What the notice must say

The notice must include statements that:

• an up-to-date copy of the relevant summary is available from the CSP
• customer can get a free copy by:

(a)   calling a number in the notice

(b)  downloading it from the CSP’s web site

(c)   lodging a request on the CSP’s web site.

Permitted methods of delivery

• personal delivery
• post to address in your records
• email, if the customer has agreed to receive notices at that address
• by SMS
• it is OK to send it with a bill or other document, by one of the above methods.

SMS ???

Yes, it’s a rare example of a consumer protection law that permits SMS notification.  But remember, that’s only for the reminder notice about the summary, not for the summary itself.

Getting the evidence right

Across their regulatory compliance, many businesses fall down in record keeping, or having some good proof that they have complied with the law.

If a particular customer denies receiving the summary or a notice, you need to be able to show it was sent.  If you’re not systematic about that, you may not have sufficient evidence.

Some businesses include the summary in a Welcome Pack, and that’s especially suitable where the pack includes log on details or something else that proves the customer must have received it.

Some of my clients send the reminder notice to all customers on a fixed date every two years.  That means that a customer who joined only recently may get a reminder a relatively short time later, but so what ?  It means that the CSP only needs to send one mass email on (for instance) New Year’s Day every second year, and compliance is assured – assuming your sign up processes include customer consent to receiving the reminder by email.

It’s a great lesson to telcos and their lawyers … Super-complex contracts don’t only confuse your customers.

The Whirlpool thread

Here’s the Whirlpool thread.

Basically, the question was about the lump sum Voda will bill you if you buy a prepay handset from their website and don’t activate within 30 days.  In some places, they call it an ‘Early Exit Fee’.

Understandably, one member of the thread assumed Voda could do it:

Since you are ordering this and having the phone sent to you, yes you’d need to activate the SIM card in the prepay pack in the 30 days. (Otherwise it’ll be followed by an invoice in the mail which they could/can legally make you pay).

But let’s look closer at Voda’s T&Cs.

They’re amazingly convoluted.  We can’t give you a URL because the terms are squirreled away in so many places.

But as far as we can follow this labyrinth, here’s what it says.  We’ll analyse the current Vodafone 226 Prepay Pack that the Whirlpool member was interested in.

A scroll box at foot of screen contains the terms & conditions.

We won’t bother you with the full guff.  All you need to know is that:

• ‘Early Exit Fees apply if not connected within 30 days of supply of handset on this Contract.’
• There is no mention of a minimum or fixed contract term, either in the T&Cs or anywhere else on the page.

No Plan Term

What’s the significance of ‘no minimum term’ ?  Well, if you take the time to seek out the definitions section in Voda’s SFoA, you learn that:  ‘Early Exit Fee means the payment or fee We will charge You, based on the Plan you are on at the time of disconnection, if, subject to the terms of this Agreement, You or We terminate Your contract with Us prior to expiration of Your Plan Term.’

So, an Early Exit Fee can only apply if customer terminates during a Plan Term.

What’s a Plan Term ?

According to the definitions, ‘Plan Term the term or commitment period of the relevant Plan as set out in Section 4 of this Agreement.’

Maybe Section 4 will tell us that a Plan Term applies for this prepay.

What we found at Section 4

Guess what ?  It doesn’t state a Plan Term for any prepay service.

The result ?

The so-called Early Exit Fee for failing to connect within 30 days cannot apply where there is no Plan Term.

Or, if this ‘Early Exit Fee’ means something different to the normal ‘Early Exit Fee’ referred to by the SFoA, there’s no basis in the documents (that we can see) for calculating it.  It’s an unspecified charge.

What would a court / the TIO do ?

Who knows ?  It’s a mess.  Maybe they’d do Voda a favour and recognise that a handset has value and stretch its terms to say that customer has to pay a fair amount.

More likely they’d just say that CSPs who pitch pages of complicated, layered T&Cs at customers deserve to get stung when their own legal team can’t keep it all together.

So we called Voda to check … and it got worse.

At 11:34 a.m. on 2 August 2008, we reached Voda’s sales team by phone, and were assured there were no Early Exit Fees applicable to the 226 offer.  ‘There aren’t any,’ they said.

We pointed out that the T&Cs at the foot of the page specifically said that Early Exit Fees could apply.  Voda rep’s best guess was that the T&Cs were ‘just a generic one’ i.e. didn’t actually apply to the prepay offer.  (Isn’t that comforting ?)

He was clear:  We could order and pay for the handset, and keep it and pay no more.  That would be our loss for not taking advantage of the prepay Maxi Cap offer, but we could do it if we wanted, with no Early Exit Fee.

He pointed out that the handset would be locked to Voda, and an unlock fee would apply to use it outside the network.

How bad is all this ?

The way Voda’s legals and web site are set up:

• An honest, god fearing Whirlpool member has concluded that a lump sum pay out charge applies, and is contractually enforceable.  Poor fellow assumed the contract terms on the page were sound.
• Legal analysis suggests that the terms don’t support such a charge.
• Voda rep says ‘Don’t worry about it.  Those aren’t the right T&Cs anyway.’

Our take on it

We intensely dislike overly complex documents, especially when terms and conditions are located in several different places.  Voda’s are a prime example of what we regard as worst practice.  No wonder everybody, from legal to web developer to sales rep to potential customer, thinks it all works differently.