Optus penalised $10 million for misleading customers over digital purchases

6 February 2019

The Federal Court has ordered Optus pay a $10 million penalty for its treatment of customers who unknowingly purchased games, ringtones and other digital content through its third-party billing service, following action by the ACCC.

Optus admitted that the company misled consumers and breached the ASIC Act when it billed customers for third party-produced content which they mistakenly bought or subscribed to through its “direct carrier billing” (DCB) service.

The $10 million penalty is one of the highest imposed by the Court after ACCC action on a consumer matter, and equals the penalty paid by Telstra last year after it admitted to similar conduct.

Optus admitted that it did not properly inform customers that the DCB service was a default setting on their accounts, and that they would be billed directly by Optus for any content bought through the service, even unintentionally.

Optus, which earned commissions on items sold through the DCB service, also admitted that it knew from at least April 2014 that many customers were being billed for DCB content they had mistakenly or unknowingly signed up for.

The DCB service allowed a purchase or subscription to be confirmed and charged to a customer’s bill after just one or two clicks on a web browser.

Despite receiving over 600,000 enquiries about the service, Optus failed to put in place appropriate identity verification safeguards, and referred customers who sought to query DCB service charges to third parties.

Many customers then encountered significant difficulties in cancelling the purchases and obtain refunds from the third parties.

“In many cases, Optus customers had no idea they were buying anything, and certainly did not need or want the content for which they were being charged,” ACCC chair Rod Sims said.

“Optus failed to take appropriate action, choosing instead to continue to charge customers and collect commissions on these sales, even after numerous complaints.

“We are pleased that the Court agreed that this conduct is simply unacceptable, and deserves a significant penalty,” Mr Sims said.

About 240,000 Optus customers have so far been refunded. The ACCC understands Optus has paid about $8 million in refunds and third party providers another $13 million.

Optus has committed to contacting potentially impacted customers who complained about the services and have not already received a refund, as well as those customers who Optus identifies as having been incorrectly charged. Optus will also review any future complaints in light of this action and deal with those customers in good faith.

Given the volume of enquiries to Optus about the service there are likely to be many affected customers that have not yet received a refund.

Customers are encouraged to check their Optus mobile account and, if they believe unauthorised charges have been applied under the DCB service, they should contact Optus on 13 39 37.

Background

During the course the ACCC’s investigation, Optus ceased offering most DCB services, and those that remain require express customer agreement for each purchase being charged to the customer's Optus account.

Optus earned about $65.8 million in commissions for products sold through the DCB service, which launched in 2012. Its customers were charged about $195 million for the content.

The ACCC commenced proceedings against Optus in October 2018. Optus admitted that it made false or misleading representations in contravention of the ASIC Act, and agreed to apply jointly with the ACCC for orders from the Federal Court.

These proceedings follow ACCC action against Telstra after it admitted to similar conduct with its Premium Direct Billing (PDB) service. Telstra was also ordered to pay $10 million.

Notes to editors

The ACCC took this action under a delegation of power from ASIC.

The ACCC has a standing delegation of certain of ASIC powers and functions for the purposes of investigation and commencement and conduct of any proceedings in relation to matters involving financial products and services provided as part of, or in connection with, the supply or possible supply of telecommunications services.

Release number: 
10/19
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