The Australian Communications Network Pty Ltd has given undertakings to the Federal Court, Adelaide following Australian Competition and Consumer Commission action.

The ACCC instituted proceedings on Monday, 15 November 2004 against Australian Communications Network Pty Ltd, a seller of telecommunications services, for alleged breaches of the pyramid selling scheme provisions of the Trade Practices Act 1974.
 
It also instituted proceedings against ACN's managing director, Mr Martin Paech; an ACN director; two ACN representatives Mr Keith Janke and Gibbschade Pty Ltd (Gibbschade), and Gibbschade's directors Mr Jonathan Gibbs and Ms Christine Schade.

The ACCC alleged that ACN and Gibbschade participated in, promoted and induced or attempted to induce persons to take part in a pyramid scheme in contravention of section 65AAC of the Act, and that Mr Paech, an ACN director, Mr Janke, Mr Gibbs and Ms Schade were knowingly concerned in and/or aided and abetted those contraventions.

The focus of the ACCC's proceedings is the CAN's marketing system. Independent Representatives pay ACN $548 (including GST) and sell those services to consumers. Independent Representatives also have the right to recruit other Independent Representatives. Those Independent Representatives can receive commissions from their personal customers as well as commissions from customers of Independent Representatives they have recruited. In addition, Customer Acquisition Bonuses are paid on the number of qualified Independent Representatives. ACN has co-operated with the ACCC's investigation and provided substantial information about the operation of the scheme. However, ACN disputes the ACCC's allegation that the ACN scheme is in breach of section 65AAC of the Act.

The ACCC is seeking declarations, injunctions, corrective notices, compliance programs for the companies and the individuals, findings of fact and costs. The ACCC also sought an interim injunction that would prevent ACN from accepting payments from participants, which the ACCC alleges are "participation payments" within the meaning of the pyramid selling provisions of the Act, until the hearing and determination of the matter.

The application for interim injunction was heard yesterday in the Federal Court before Justice Brad Selway. As a result of the ACCC application, ACN has given undertakings to the court to the effect that:

  • all participation payments ACN receives from new Independent Representatives from midnight 23 November 2004 until further order of the Federal Court shall be held in trust
  • ACN will refund all participation payments received during the above period, plus any interested accrued, should the Federal Court find ACN in breach of section 65AAC, and
  • ACN will extend the cooling off period, under which new Independent Representatives joining during the above period can request a refund of their participation payment, until further order of the Federal Court.

A trial is scheduled in the week beginning 21 February 2005.