What is Unconscionable Conduct in Australia?

Telstra has been ordered to pay a $50 million penalty for selling postpaid mobile phone contracts to more than 100 customers who couldn’t understand the contracts, or pay for the plans.

The Federal Court of Australia has ordered Australia’s largest telecommunications provider to pay the fine after the company admitted breaching Australian Consumer Law by acting ‘unconscionably’ when sales staff at licensed stores in the Northern Territory, South Australia and Western Australia ‘exploited social, language, literacy and cultural vulnerabilities’ to sell the mobile devices to predominantly Indigenous customers.

The company also admitted to manipulating credit assessments to circumvent its own credit guidelines, as well as signing customers up to multiple plans on a single day and misrepresenting products as being ‘free.’

The penalty is the second highest ever imposed under the Australian Consumer Law, and has been welcomed by the Australian Competition and Consumer Commission (ACCC) given the calculated and predatory nature of the behaviour,

“We expect much better behaviour from businesses like Telstra,” said ACCC chair Rod Simms.

The investigation

The ACCC launched Federal Court proceedings against Telstra last year.

The company co-operated with the watchdog’s 18-month long investigation and has since taken steps to waive the debts incurred by the customers that were preyed upon.

The result of Telstra’s conduct was that customers accrued debts of between $1600 and $19,524, which they did not have the capacity to pay.

Unethical practices

Telstra’s board and senior executives say they were not aware of the improper and unethical sales practices when they occurred but the company has also acknowledged that it had no effective systems in place to detect or prevent this type of conduct.

To make matters worse, Telstra was the only mobile provider in these areas, and took advantage of this position.

Poor customer service

In addition to the $50 million fine, the ACCC accepted a court-enforceable undertaking from Telstra to provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline, and enhance its digital literacy program for consumers in certain remote areas.

And while $50 million will no doubt make an impact on Telstra’s bottom line, it still made a staggering $1.8 billion last year, despite its increasing marketplace reputation for treating customers poorly.

Part of the problem, is that it is particularly difficult to speak to a human at Telstra these days – all of its systems are automated and ‘on-hold’ times are often exceptionally long. Using the app means chatting to a ‘bot’ and that doesn’t always immediately solve the problem either.

Often, the app won’t save the conversation, so you’re forced to repeat yourself over and over to every different team member who responds to the inquiry.

Ultimately, people with significant debts end up with their debts being sold off to debt-collection agencies who then aggressively chase repayment, and threaten legal action, causing these people a great deal of duress.

And if the debacle that was the Federal Government’s Robodebt Scheme has taught us anything, it is that people who get caught in an automated system often feel powerless, and helpless about getting out of it, leading to them suffering severe depression anxiety and in some cases considering suicide.

What is unconscionable conduct in Australia?

Section 21 of the Competition and Consumer Act 2010 (Cth) makes it unlawful for a person to engage in conduct that is unconscionable in the provision of, or acquisition or possible acquisition of, goods or services in the course of trade or commerce.

The section makes clear that a pecuniary (monetary) penalty may be imposed for a contravention.

Section 22 of the Act lists a range of factors which a court may consider when determining whether conduct is unconscionable. These include:

• The relative strengths of the bargaining positions of the customer and supplier,
• Whether the customer was required to comply with unreasonable conditions that were in the supplier’s interests,
• Whether the customer was able to understand any documents relating to the supply,
• Whether any undue influence or pressure was exerted on the customer,
• Whether any unfair tactics were used by the supplier,
• The amount for which the customer could have acquired similar goods or services elsewhere,
• Any industry codes or requirements,
• The risks to the customer arising from the supplier’s conduct,
• The extent to which the supplier was willing to renegotiate the terms and conditions of the agreement, and
• The extent to which the parties acted in good faith.

The specific circumstances which may amount to unconscionable conduct are not listed in the Act; however, the courts have made clear the conduct must be more than simply unfair or a result of persistent or harsh bargaining.

Rather, the behaviour must be so harsh or oppressive that offends against the good conscience of right-minded members of society. Such behaviour will normally be deliberate, manifestly unfair and patently unreasonable.

Complaints of unconscionable conduct can be made to the ACCC, the Australian Securities and Investment Commission (ASIC) or the relevant state or territory consumer protection agency.