The Australian Competition and Consumer Commission (ACCC) is looking to hit Optus with $10 million in penalties after the telco allegedly mislead customers in relation to its third-party billing service.
The ACCC's investigation uncovered that from April 2014 Optus' third-party billing service (known as 'Direct Carrier Billing or DCB), led a significant number of customers to be charged by the telco for premium content like games, ringtones and horoscopes that they did not want and had not agreed to buy.
The DCB service allowed Optus customers to purchase digital content from third-party developers (but did not include content acquired from the usual app marketplaces like Google Play or the App Store). Charges were automatically applied to Optus customers' pre-paid or post-paid mobile accounts.
It is possible that more than 240,000 customers were affected.
Optus has already admitted it made false or misleading representations in contravention of the ASIC Act, allowing the ACCC to begin proceedings against the telco.
The proposed orders from the ACCC include declarations that Optus breached the ASIC Act and that it ought to pay $10 million in penalties.
The Federal Court will determine whether the proposed penalties are appropriate at a later date.
Optus also admitted that it failed to adequately inform customers that the DCB services was a default account setting and that if customers received premium content via their phone, even unintentionally, they would be billed by Optus for it.
The company has committed to offer refunds to customers affected by the DCB service. The ACCC says a total of $31 million has been refunded to around 240,000 Optus customers to date, with Optus paying around $12 million directly and third party providers refunding another $19 million.
ACCC chair Rod Sims says the misleading service impacted vulnerable customers, including children.
"A substantial number of Optus customers were signed up to subscriptions for expensive, often unwanted content without being required to enter payment details or verify their identity, as occurs with many other online purchases," says Sims.
"Many customers didn't realise they were signing up to anything at all, and in some cases family members such as children incurred these charges without the account holder's knowledge."
"Despite over 600,000 direct enquiries Optus received over a number of years about this DCB service, Optus chose to continue to generate major profits at the expense of basic consumer protections."
"There was compelling need for safeguards to be put in place to stop customers paying for content like ringtones and games that they did not want, did not use, and had difficulty unsubscribing from, and Optus just ignored this."
Back in May, the telco was slapped with a $1.5 million fine by the Federal Court for making misleading statements to its customers regarding their transition to the NBN.
The telco was ordered to pay up after it told 14,000 customers, between the dates of October 15 and March 17, that their services would be disconnected if they didn't move to the NBN.
The court found that Optus couldn't legally force disconnection within the timeframe that it claimed, under the terms of its own contract.
The ACCC's action against Optus follows similar proceedings against Telstra over its Premium Direct Billing (PDB) service, where it was ordered to pay $10 million in penalties.
Business News Australia