Optus Faces $100M Penalty for Unconscionable Conduct

Optus Mobile Pty Ltd (Optus) has admitted to engaging in unconscionable conduct when selling telecommunications goods and services to hundreds of consumers, after court action brought by the ACCC.

In many instances the consumers did not want or need, could not use or could not afford what they were sold, and in some cases consumers were pursued for debts resulting from these sales.

Many of the affected consumers were vulnerable or experiencing disadvantage, such as living with a mental disability, diminished cognitive capacity or learning difficulties, being financially dependent or unemployed, having limited financial literacy or English not being a first language. Many of the consumers were First Nations Australians from regional, remote and very remote parts of Australia.

As part of an agreement announced today, the ACCC and Optus will jointly ask the Federal Court to impose a total penalty of $100 million on Optus for breaching the Australian Consumer Law. It is a matter for the Court to decide whether the penalty is appropriate and to make other orders.

Optus has admitted that its sales staff acted unconscionably when selling phones and contracts to over 400 consumers at 16 different stores across Australia between August 2019 and July 2023. Examples of the conduct engaged in by the sales staff included:

• putting undue pressure on consumers to purchase a large number of products, including expensive phones and accessories, that they did not want or need, could not use or could not afford;
• failing to explain relevant terms and conditions to vulnerable consumers in a manner they could understand, resulting in them not understanding their ongoing payment obligations;
• not having regard to whether consumers had Optus coverage where they lived;
• selling products and services which Optus knew, or ought reasonably to have known, the consumers could not afford; and
• misleading these consumers to believe that goods were free or included as part of a bundle at no additional cost.

Optus has also signed an undertaking, accepted by the ACCC, that it will compensate impacted consumers and improve its internal systems, the commencement of which is subject to the Court making relevant orders.

"The conduct, which included selling inappropriate, unwanted or unaffordable mobiles and phone plans to people who are vulnerable or experiencing disadvantage is simply unacceptable," ACCC Deputy Chair Catriona Lowe said.

"During our investigation into this case, the ACCC heard many stories of the impact of this conduct on affected consumers."

"Many of these consumers who were vulnerable or experiencing disadvantage also experienced significant financial harm. They accrued thousands of dollars of unexpected debt and some were pursued by debt collectors, in some instances for years," Ms Lowe said.

"It is not surprising, and indeed could and should have been anticipated, that this conduct caused many of these people significant emotional distress and fear."

"We are particularly concerned that Optus engaged debt collectors to pursue some of these consumers after it had launched internal investigations into the sales conduct," Ms Lowe said.

"Optus has admitted to this conduct and has appropriately committed to changing its systems. It has begun compensating affected consumers."

"We are grateful to the many advocates, financial counsellors and carers who assisted the impacted individuals. We also thank the Telecommunications Industry Ombudsman for their role in drawing these issues to our attention."

Optus admits inappropriate practices, using debt collectors

Optus has admitted that the inappropriate sales practices affected many consumers in its two Darwin stores and 24 individuals in stores around Australia.

In respect of the Mount Isa store, which has now closed, Optus pursued debts in circumstances where its senior management knew that those debts related to contracts for goods and services that had been or might have been created without the knowledge of the affected consumers, the majority of whom were First Nations Australians from Mount Isa and the Northern Territory.

Optus's senior management became increasingly aware that Optus staff were engaging in the inappropriate sales practices and that Optus's systems and controls could not stop the conduct. Optus acknowledged it failed to promptly take steps to fix deficiencies in its systems, which allowed the conduct to continue.

Commission-based sales arrangements for Optus's sales staff had the potential to incentivise the inappropriate sales conduct, despite the Telecommunications Consumer Protections Code requiring Optus, from 17 June 2022, to have regard to the ACCC's best practice recommendations, which recommend businesses avoid commission-based selling because of its potential to exacerbate the vulnerability of consumers.

This case follows similar ACCC action against Telstra, which was ordered in May 2021 to pay a $50 million penalty for engaging in unconscionable conduct when it sold mobile contracts to 108 Indigenous consumers between at least 1 January 2016 and about 27 August 2018.

Summary of the proposed Undertaking

Optus has given an undertaking to provide remediation and has started compensating consumers. It has undertaken to address claims through a clear resolution process.

Optus has undertaken to make a $1 million donation to an organisation facilitating digital literacy of First Nations Australians.

Optus has undertaken to review its complaint handling, improve staff training, change its debt collection systems, and make other changes to systems and procedures.

It has undertaken to change the remuneration structure of sales staff to disincentivise them from engaging in similar conduct.

It has also commenced buying back 34 Optus licensee stores in the Northern Territory, Queensland and South Australia.

Consumers who think they may have been impacted by conduct similar to that outlined in the undertaking can call Optus's specialist customer care team on 1300 082 820 for further information or support.

The undertaking offered by Optus, and accepted by the ACCC, is available at Optus Mobile Pty Ltd. It will come into force once the court makes final orders.

Examples of alleged conduct

A First Nations consumer, who speaks English as a second language and lives in a remote community with no Optus coverage, was approached by Optus staff outside an Optus store and pressured to enter. They did not want or need a new phone. They thought staff were offering them a free phone and other free products and felt pressured by staff to accept.

They were contracted to two high-end phones, three phone plans, two Device Protect services and one accessories bundle, which had a total minimum cost of $3,808 over 24 months. The following day, the consumer was entered into a second contract for a phone plan and accessories, for a total minimum of $540. The consumer was not informed there was no coverage at their home address, and false information was entered into their credit check. The consumer had their debt referred to debt collectors and was contacted on many occasions by the debt collector. The consumer sought the assistance of a financial counsellor as they did not understand what the debt related to.

Another consumer, who lives with an intellectual disability, attended an Optus store with a support worker to purchase a $20 pre-paid recharge for their phone. The consumer's main source of income was the disability support pension. They were told by Optus staff that they could get a new phone and a free speaker for $30 a month, and were pressured into the purchase.

Optus staff added a false ABN to their account and manipulated credit checks. The consumer was entered into three separate contracts for a phone, plans and a smart watch and accessories, which they could not afford and would cost over $8,000 over 36 months. The consumer went to a community legal centre who assisted them with cancelling the contracts with Optus.

In 2019 an internal Optus investigation into customer accounts at the Optus store in Mount Isa resulted in a report that identified that the store manager had falsified identification documents and consumer information to create services and had used the identities of First Nations consumers who were not aware that their identities had been used. The report identified 82 contracts that appeared to have been fraudulently completed without consumer knowledge.

After Optus was notified of the conduct the subject of the report, including through its senior management, it referred and sold outstanding debts associated with some of those contracts to third party debt collection and factoring agencies. Some consumers whose identities were associated with the relevant customer accounts were subject to threats of legal proceedings being commenced against them and of reporting defaults to credit reporting bodies. Some customers continued to be pursued by third party collections agencies until as late as July 2024 and Optus had not taken steps to stop that occurring.

Background

Optus is Australia's second largest telecommunications provider. It is a wholly-owned subsidiary of Singtel Optus Pty Ltd, a foreign owned private company.

In Australia, Optus's retail stores are either:

• owned and operated directly by Optus RetailCo Pty Ltd; or
• owned and operated through third party licensees, through Retail License Agreements. For example, prior to Optus buying back certain stores, all Optus stores in the Adelaide region were owned and operated by Mavaya Pty Ltd, and all Optus stores in the Northern Territory, as well as several in regional Queensland, were owned and operated by Suntel Communications Pty Ltd.

The ACCC commenced court action against Optus on 31 October 2024. The investigation was prompted by a referral from the Telecommunications Industry Ombudsman.