The Australian Competition and Consumer Commission has welcomed today's Federal Court judgment finding Telstra's use of $0 mobile phone advertising misleading and deceptive.
"The $0 statement is a very powerful marketing tool that has been in widespread use", ACCC Chairman, Mr Graeme Samuel, said today. "The judgment sends a message to not only the telecommunications industry but other retail areas this type of advertising is not acceptable if the full package effectively costs more with the product offered for $0 than the remaining goods and services cost without it.
"$0 should only be used by companies bundling a handset and telephony services when in fact the handset being offered for sale is at no extra cost. Charging more than the ordinary price of the remaining items in a package or increased early termination charges can be misleading".
In August 2003 the ACCC instituted proceedings against Telstra alleging that certain $0 mobile phone representations made in Telstra advertisements were misleading as customers who signed up to Telstra's $0 'phone option' did not receive call credits that are available to other customers on Telstra's monthly member plans, and that customers had to commit to a longer minimum contract term which involve higher early termination charges.
The ACCC also alleged that Telstra had engaged in misleading and deceptive conduct in relation to the use of statements that mobile phone handsets were available for '$0 upfront' on Telstra's monthly member plans, where the cost of the phone over the minimum contract period of 18 to 24 months is paid not as part of, but in addition to, Telstra's monthly member plan requirements.
The matter was heard in the Federal Court in February this year. Justice Gyles upheld some of the ACCC's concerns and found that the use of $0 by Telstra was misleading in some respects as Telstra effectively charged more for $0 phone packages than it did for the other items in the package without the handset.
However, Justice Gyles did not find that Telstra's use of the statement '$0 upfront' in its marketing brochure was misleading in relation to the particular circumstances of that brochure.
The court held that parts of Telstra's advertisement amounted to false representations and misleading and deceptive conduct in contravention of sections 53(e) and 52 of the Trade Practices Act 1974.
The court has stood the matter over for final orders. However, Justice Gyles has indicated that Telstra will be required to pay the ACCC's costs and that he will not be ordering Telstra to publish the corrective advertisements sought by the ACCC.
"All mobile phone providers need to ensure that they strictly comply with the Act and the ACCC will pursue those that make misleading $0 mobile phone offers", Mr Samuel said. "The ACCC will also assess the implications of this judgement to marketing activities in other industries".