Consumers were misled by a mobile phone reseller, Total Communications, about the total cost of mobile phones sold at its outlet, the Federal Court, has found.
The finding follows action by the Australian Competition and Consumer Commission.
On 11 October, Total Communications published a two-page newspaper advertorial advertising mobile telephones and promoting the business. The advertisement showed four mobile telephones in conjunction with the text '$0' in a large, eye-catching type. The lower right-hand corner of the advertisement contained a small disclaimer stating '*conditions apply'. The advertisement failed to specify any conditions, especially fundamental conditions, such as the total cost of the associated airtime contract.
The ACCC was concerned that the non-disclosure of the applicable conditions, including the fact that a substantial sum of money would be paid over the contract's life, was likely to mislead consumers, especially first-time mobile phone buyers.
The ACCC brought its concerns to the attention of Total Communications, which cooperated to resolve the matter quickly.
"This matter highlights the vigilance required by businesses, especially those involved in rapidly changing industries such as the telecommunications industry, in their advertising", ACCC Chairman, Professor Allan Fels, said today.
"Businesses must ensure that conditional offers are properly explained to consumers, in particular first-time consumers of the product.
"The up-front disclosure of conditions benefits not only the consumer, but the business as well, by creating trust and a good marketing relationship".
The Federal Court, Hobart found that the advertisement, which appeared in the northern Tasmanian newspaper The Examiner, contravened the Trade Practices Act 1974 because the essential conditions of the contract, such as the minimum monthly rental, the number of months the contract must run, and the total cost of the contract were not set out.
The Federal Court ordered a five year injunction against Total Communications, a Tasmanian business, and required it to publish a corrective advertisement and implement a trade practices compliance program. As part of this program, Total Communications will ensure all its advertisements comply with the Australian Communications Industry Forum Industry Code on Customer Information on Prices and Conditions*.
*This code was implemented in 1999 to provide a benchmark for advertising in the telecommunications industry. The ACCC strongly supports the code and encourages advertisers to make use of it to enhance its communication with its customers, providing benefits to both the customer and the advertiser.