Telstra banned from making misleading statements on radio and television programs about telecommunications charges

16 December 1996

Telstra has been banned by the Federal Court from making false or misleading representations to the public in a radio or television program with respect to any charges for its telecommunications services.

The injunction follows Australian Competition and Consumer Commission action and Telstra will be restrained by it until 31 December 1999.

The proceedings were brought after Telstra representatives stated that Telstra offered 21 cent local telephone calls, when that was not the case. The statements made on behalf of Telstra were made on live prime-time television and radio programs in response to Optus' launch of its 20 cent local call campaign.

Telstra representatives referred to its Local Call Saver 15 Flexi-Plan (CS15) but falsely stated its effect. Under CS15 Telstra offers a 15% discount on calls which are made within a bracket of $15 to $100 monthly expenditure on eligible calls. The standard tariff charged by Telstra for local calls is 25 cents. Average cost per local call within a particular month therefore ranges between a maximum of 25 cents and a minimum of 21.81 cents. The minimum average cost is obtained on the 400th call made in one month. The average cost increases if the customer makes more than 400 calls in one month, or fewer than 400 calls in one month. There is no point at which Telstra customers obtain 21 cent local calls.

In his judgment, Jenkinson J stated that the very great commercial significance of a comparison by telephone service consumers of the charges made by the providers of each service should have been obvious to the Telstra representatives who made the false and misleading statements.

He also stated that the magnitude of responsibility on them to avoid the publication to those consumers of misleading information should also have been obvious. He said that "their failure to avoid engaging in the misleading conduct ... was in the circumstances deplorable." While he accepted that Telstra would be unlikely to make further misrepresentations about CS15, had publicly acknowledged the mistakes in its statements and had diligently and promptly instructed its staff as to the precise terms and conditions of the plan, he stated that "the kind of conduct which has founded the proceeding is ... likely to be repeated."

He further said that "under the exigencies which keen competition for the custom of a multitude of consumers imposes on [Telstra] it constantly resorts, as does its competitor Optus, to repetitive television advertisement marked less by information than by emotional stimulation."

He said that while he expected that the text of advertisements would be carefully scrutinised by Telstra advisers before they were released, there are circumstances where "one or other of the competitors offers a revised charge for a telecommunications service of substantial interest to consumers [and] the demands of television and radio broadcasters for exposition by the revising competitor and for prompt responsive comment by the other competitor will often be met at short notice. It is in those circumstances that the conduct of senior officers of [Telstra] in response to such demands gives ground ... to apprehend a likelihood of repetition of conduct of that kind. The harm done by conduct of that kind is not wholly undone by subsequent retraction and explanation and curial retribution." Jenkinson J considered that he should use his discretionary power to emphasise the Court's disapproval of Telstra's conduct. He said that he did not consider unjustified a description of the conduct of Telstra's representatives as "flagrant." ACCC Chairman, Professor Allan Fels described the injunction as a great victory for consumers.

"For the next three years it will place the threat of contempt of court over Telstra representatives who make statements about its service charges over any television or radio programs. It will made the ACCC even more effective in protecting the rights of consumers in such a complex area as the telecommunications industry. "Most Telstra staff will be unaffected by the injunction," he said. "Because it targets representations made on television and radio programs it is likely only to affect top level Telstra executives. It is these very people who should provide leadership and example for their own staff and for the community as a whole." Further information

Release number: 
MR 170/96
ACCC Infocentre: 

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