Advertisements which promoted Optus' broadband plans as being "unlimited" were misleading and deceptive in contravention of the Trade Practices Act 1974*, the Federal Court in Melbourne has declared.
In the newspaper and television advertisements the subject of the Australian Competition and Consumer Commission's proceeding, the headline claim made by Optus was that consumers could obtain "unlimited broadband".
In fact, the plans contained a condition that once consumers reached a specified data allowance (15GB or 30GB), the speed of their service would be throttled back to 256 kbps. The ACCC's evidence established that at that speed, the service is practically unusable for popular internet usages including downloading movies and television programs, streaming video (e.g. YouTube) and video calls (e.g. Skype). The existence of the condition was disclosed but only in very small print in the advertisements. No explanation was given by Optus in the advertisements as to the effect that throttling would have on the functionality of the consumer's user experience.
Justice North made a declaration that Optus had contravened section 52 of the Act as it failed to sufficiently and prominently disclose the throttling condition and that at the throttled speed, some uses would be either unworkable or significantly impaired.
"Telecommunications providers should think very carefully before claiming that their service offerings are unlimited. If there are any limitations, then they run the risk that the advertisements are misleading and that they will receive unwanted attention from the ACCC," ACCC chairman Graeme Samuel said today.
"It is simply unacceptable to make bold headline claims like 'unlimited' and then to bury important conditions or qualifications in the fine print as Optus did in this case. Further, simply disclosing the existence of a condition may not be enough. In this case, the Act also required Optus to explain to consumers the effect of the condition on the functionality of the service being provided."
The decision of Justice North follows orders made by his Honour in October 2010 in relation to other "unlimited" claims made by Optus.
In joint submissions made by the ACCC and Optus to the Court, Optus admitted that advertisements for its $70 pre-paid mobile Turbo Max offer, $40 pre-paid mobile Turbo Text offer and Fusion home telephone and broadband bundle plan were misleading and deceptive. The advertisements were misleading because they represented that consumers could make unlimited calls or send unlimited SMS, when in fact a number of call and SMS types were excluded.
Justice North made declarations in respect of that conduct and granted injunctions in accordance with consent orders agreed by the parties. The injunctions prevent Optus for a period of two years from:
- representing in connection with pre-paid mobile services that a consumer can get unlimited calls to any mobile when there are limitations on the type, amount and/or total duration of the calls that may be made, or that a consumer can get unlimited SMS when there is a limitation on the number or type of SMS that may be sent, and
- representing in connection with home telephone services that a consumer can get unlimited calls when there are limitations on the type, amount and/or total duration of the calls that may be made.
Exception is made in the injunctions for the Optus Fair Go Policy, so as to exclude their application to activities such as running a telemarketing business or call centre, re-supplying or re-selling of Optus' services and other activities which would not be reasonably regarded as ordinary personal use.
This proceeding is one of a number of proceedings taken by the ACCC in recent times against misleading and deceptive advertising in the telecommunications sector.
"Telecommunications providers should now be in no doubt that the ACCC will take action against them if they engage in misleading advertising. The Competition and Consumer Act 2010 demands truth in advertising and consumers deserve nothing less," Mr Samuel said.
* On 1 January 2011 as part of Australian Consumer Law amendments the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010.
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