Virgin Mobile (Australia) Pty Ltd has been found by the Federal Court to have made false and misleading representations and also to have failed to state the full cash price of mobile phones in national advertisements for its Dial High Club mobile phone packages. The findings follow Australian Competition and Consumer Commission court action.
Virgin Mobile's advertisements contained representations such as 'Nokia 8310 on us, handcuffs off you', 'No long-term contracts', and 'Leave when you like' and implied to consumers that they were not obliged to pay the specified monthly call charges for any particular period and that they could leave their contract without making any additional payment on termination.
In fact, unless consumers continued to pay the monthly call charges for the full period of 24 months, they were required to pay out the full cost of the telephone handset. Further, Virgin Mobile failed to disclose to consumers the cash price of the handset (up to $1039 for one package) or the minimum cost of joining the Dial High Club package (as high as $1069 for one package).
"Consumers are entitled to know the full cost and consequences of their entering into mobile phone contracts", ACCC Chairman, Professor Allan Fels, said today.
"Offers of no, or low, cost mobile phones and/or reference to seemingly low plan payments may persuade consumers to enter into transactions they might otherwise avoid, only to find out later that they are either committed to a long period of monthly payments adding up to a lot more money than expected or else face substantial early termination payments.
"The Trade Practices Act 1974 requires advertisers to tell the whole story and reveal this extra money at the start, so that consumers can make an informed choice about whether to join.
"The ACCC initially sought to give Virgin Mobile the opportunity to avoid legal action through providing court-enforceable undertakings but that Virgin Mobile had not offered a suitable undertaking.
"The making of the orders by the Court confirmed the ACCC's case that the Virgin Mobile's advertisements were neither fair nor transparent".
Apart from declaring that Virgin Mobile made false and misleading representations, the Federal Court made other orders, all with the consent of Virgin Mobile, including orders requiring Virgin Mobile:
- to write to consumers who signed up to the relevant Dial High Club packages from October 2001 to March 2002, informing them of the Court's findings and explaining to consumers all the relevant costs and consequences of their signing up to the packages;
- to publish a public notice in newspapers nationally as well as on its Website;
- to state the full cash price of mobile phones and the full cash price or minimum cost of mobile phone packages, as well as the method by which any amount payable on termination is calculated, in its future advertisements;
- to create a website to inform consumers of advertisers under the Trade Practices Act in promoting mobile phone and phone packages.
- to implement, maintain and have audited, a trade practices compliance program; and
- pay the ACCC's costs.