The case of Australian Competition and Consumer Commission v Excite Mobile Pty Ltd1 demonstrates the consequences of pressure selling tactics and failing to inform the consumer of unusual terms in a contract.
Excite Mobile Pty Ltd (Excite Mobile) is a company that supplies mobile telecommunications services promoted through telemarketing calls by representatives of Lime India Private Limited (Lime India) and other call centres in India, Pakistan and the Philippines. These representatives were provided with a script to follow when making unsolicited calls to customers’ personal phone numbers, however this was not followed.
A gift of a free holiday and mobile phone was offered as an incentive to signing up to a 24 month Excite Mobile plan. The plan consisted of a minimum monthly fee, however, customers were also restricted by a daily cap of $2,20 a day for calls and texts on the monthly plan. The daily cap was only disclosed to the customer after they had agreed to the terms of the contract.
The telemarketer would ask the customer if they had Optus coverage in their area. If Optus coverage was available the terms of the contract would be read to the customer and consent to enter the contract confirmed.
At times when customers would say they did not receive Optus coverage in their particular area, statements such as “Well who are Wendy and Tommy? We sold them mobile phones so you should get one as well.”
In the event of a customer wishing to terminate the contract within 10 days of signing up, they were required to pay a $75 “cooling off fee”. If the phone or its packaging was damaged when returned, the customer was required to pay for the phone outright ($195). Payments under the Excite Mobile contracts were to be by direct debit; telemarketers obtained consent to debit these payments and relevant account information. In the event an account remained outstanding the amount owing would be withdrawn from the customer’s account.
At least six customers who had expressed concerns about their contract or service were informed by Lime India on behalf of Excite Mobile that they would need to contact “Telecommunications Industry Complaints” (TIC). At least a further 21 customers were informed of the need to contact this “complaints body” during the initial unsolicited call or the Welcome Pack sent to their address.
The number for TIC was that of Excite Mobile and was answered by Lime India, with no disclosure of the affiliation with Excite Mobile. In some cases the Lime India representative made positive statements that the TIC number was not connected to Excite Mobile and that they were unable to access Excite Mobile records. Customers were provided with a complaint reference number and advised of their rights and responsibilities in relation to their contract.
Excite Mobile unsuccessfully attempted to register the business name “Telecommunications Industry Complaints”, instead registering “Telecom Customer Complaints”.
From early 2010 Excite Mobile sent out letters to customers with outstanding accounts. Various letter templates were used seeking payment of the account either outright or according to a payment plan. In particular, the “Times are Bad” letter stated that the customer was required to call the number provided and agree to pay the alleged debt or the matter would be pursued in court. The letter went on to state that if this course of action was taken, the Court was at liberty to order the customer pay an additional charge of 20% of the alleged debt and requiring repossession of all assets of value including children’s toys.
The letters represented that they were sent by an independent debt collector “Jerry Hastings”. In fact, all debt collection communications were made by Excite Mobile or on its behalf. Further, references were also made to Jerry Hastings legal representative, another fictional person.
All calls to the Jerry Hastings number were returned by either Ms Smart or Mr Brown, the founders and directors of Excite Mobile Pty Ltd, who represented they were from the Jerry Hastings office.
Allegations by the ACCC
The Australian Competition and Consumer Commission (ACCC) made the following allegations against Excite Mobile:
- their sales method was unconscionable;2
- they misrepresented the extent of coverage available to a significant number of consumers; 3
- they misrepresented the nature of their complaints handling section as an independent organisation;4 and
- numerous misrepresentations were made about their debt collection entity, processes and consequences which amounted to undue coercion and unconscionable conduct.5
The Court held that Excite Mobile, its directors and employees had knowingly contravened numerous provisions of the Trade Practices Act 1974 (Cth) (TPA).
With respect to Excite Mobile’s sales method; the Court noted that the daily cap, the direct debit arrangement and the “cooling off” charges were unusual, misrepresented and accordingly contributed to an unconscionable sales method.
The Court also found that numerous Excite Mobile contractors had knowingly misrepresented the extent of coverage available to customers: in many cases blatantly lying in order to entice customers to sign up.
Further to this, the Court relied on the evidence of the Directors and Ms Smart, in concluding that the company’s complaints handling system was both set up for the purpose of misleading customers and indeed had the effect of doing this.
Finally, Excite Mobile’s representations relating to debt collection processes were found not only to have been misleading and deceptive, but also unconscionable. Due to the threatening and aggressive nature of these practices, the Court determined that this conduct also amounted to undue coercion.
The ACCC has indicated that it will now be seeking declarations that Excite Mobile contravened the TPA and that its directors and its employees/agents were knowingly concerned in this conduct. The ACCC will also seek injunctions, pecuniary penalties, orders that the directors be disqualified from managing a corporation for a period of five years.6
Take Home Tips
Although this case is factually quite unique, it services as an important reminder that:
- Disclosure of unusual terms should always be made to consumers prior to entering into agreements;
- Demand letters sent should not misrepresent a consumer’s rights or contain illegitimate threats; and
- Consumers should be advised of their right to complain to an industry body or regulator (where applicable) in addition to any internal dispute resolution process.