Court finds telecommunications bundling to be misleading and third line forcing

5 April 2012

The Federal Court today made declarations by consent that the company formerly known as Clear Telecoms (Aust) Pty Ltd engaged in both misleading and deceptive conduct and third line forcing. These declarations relate to the sale of bundled deals of telecommunication services and equipment rental agreements to two small businesses in 2008.

The Australian Competition and Consumer Commission had alleged that the two businesses who took up these bundled offers were enticed to do so through the offer of free equipment and call credits. The businesses were unaware that they were being signed up to a rental contract for the equipment with an unrelated finance company.

The third line forcing in this matter was the tie between the supply of telecommunication services with call credits and the rental of equipment through a finance company.

This court result is the culmination of a number of activities by the ACCC to stop this type of conduct. The ACCC originally instituted proceedings in 2008 against 28 respondents, including other telecommunications companies.

“The ACCC is pleased to see that these types of misleading sales practices are no longer common in the industry. Many of the telecommunication companies that were engaging in this type of conduct have stopped trading and left the industry,” ACCC Chairman Rod Sims said.

“Since we became aware of the conduct we have spent considerable time not only on court proceedings but in educating small businesses to better protect themselves.”

“Bundled telecommunications deals in general may be useful for some businesses. But business operators who are being offered such deals should do their homework first. Know exactly how much the deal will cost overall, what happens to any equipment at the end of the lease, who the parties involved are and if you can choose your own finance company”.

“Business operators should be wary of salespeople who are not upfront with important information and if they believe a salesperson is attempting to mislead them they should inform the telecommunications and finance companies being represented. No business these days can afford to have sales representatives who are not doing the right thing by potential customers.”

The ACCC is aware that some concerns have been raised by businesses involved in the original conduct that are still being pursued for payments relating to leased equipment. Whether this conduct raises issues will depend on the circumstances, but any business that has concerns should contact the ACCC.

The Court also made declarations by consent that a number of individuals who were employees or directors of other telecommunications companies were knowingly concerned in similar third line forcing conduct. Orders were made preventing them from being involved in similar conduct in the future.

The Court further declared that Australian Integrated Finance, a finance company used by one of the telecommunication companies now deregistered, was also knowingly concerned in third line forcing conduct in relation to two small businesses.
Listing of status and respondents (the remaining active respondents are idicated by an asterisk)

Deregistered

  • Link Solutions Pty Ltd
  • Service LS Pty Ltd
  • Axis Telecoms Pty Ltd
  • Sonofon Pty Ltd
  • Service SO Pty Ltd
  • Telecom One Pty Ltd
  • Service TO Pty Ltd
  • WorldTel Corporation (Victoria) Pty Ltd
  • Skylink Communications Pty Ltd
  • Queensland Communications Company Pty Ltd
  • Service QCC Pty Ltd

Deregistration in progress

  • WorldTel (Aust) Pty Ltd

Under External Administration

  • Service AT Pty Ltd
  • Australian Integrated Finance Pty Ltd Under
    Declaration—Receiver and Liquidator of AIF neither opposes or consents to the declaration being sought

Orders being made by the court  — Declaration, Injunction (by consent)

  • George Tawaf*
  • Mark Nesbitt*
  • Romeo Wehbe
  • Manoel Wehbe*
  • Fakhr Fakhr*
  • Joesph Ayoub*

Proceedings dismissed

  • Barry Kennedy
  • Enterprise Finance Solutions Pty Ltd
  • CIT Group (Aust) Ltd
  • Anthony Hakim*(dismissed by consent)

Registered

Orders being made by the court — Proceedings dismissed (by consent)

  • Clear Communications (EurAust) AB*
  • National Telecoms Group Pty Ltd*

Orders being made by the court — Declarations (by consent)

  • Clear Telecoms (Aust) Pty Ltd*

Orders being made by the court— Injunction (by consent)

John Masia*

Links

Release number: 
NR 069/12
ACCC Infocentre: 

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