Australia - Hold The phone: The ACCC Has Lost Its Case Against TPG Claiming Misleading And Unfair Contract Terms.

Legal News & Analysis - Asia Pacific - Australia - Competition & Antitrust - Intellectual Property

6 January, 2020

 

Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2019] FCA 1677.

 

What you need to know

 

  • The Federal Court has dismissed the ACCC's case against TPG for misleading and deceptive conduct and unfair contract terms at first instance.
  • The Court found that a term of TPG's customer contract, requiring a prepayment of $20 to cover additional phone charges which would never be refunded in full, was not misleading or unfair.
  • The ACCC has appealed the decision.
     

What you need to do

 

  • Terms and conditions requiring payment by consumers should be clearly flagged in terms and conditions to avoid being considered misleading or unfair.
  • Care should be taken in how payment obligations are described to ensure they accurately reflect the nature of the payment.  In this instance, the Court was satisfied the description was understood by customers.
     

The TPG Plan

 

The ACCC brought proceedings against TPG Internet Pty Ltd (TPG) claiming that a term in TPG's contracts for mobile, internet and home telephone services was misleading, deceptive and unfair under the Australian Consumer Law (ACL).

 

When entering into a TPG plan for phone or internet services, a customer is required to make a $20 "prepayment", to be held by TPG to pay for usage of any services that are not covered under the scope of the customer's plan. The prepayment is deducted from the customer's account by direct debit, and will be topped up by additional deductions if the customer uses $10 or more of the prepayment on additional services. When a customer cancels a plan, the unused portion of the prepayment is forfeited by the customer. The amount forfeited to TPG would therefore generally be between $10 and $20 per customer (Forfeiture Term). 

 

The details of the prepayment term were set out in the terms and conditions available on the TPG website for each plan as a customer clicks through details of, or an application for, a plan.

 Issues before the Court

 

The ACCC's case required the Court to determine:

 

  • whether the use of the word "prepayment" in the plan terms and conditions to describe the $20 payment and additional top-up payments was misleading or deceptive; and
  • whether the Forfeiture Term was an unfair contract term.

 

Misleading or deceptive conduct

 

The ACCC claimed that TPG represented to prospective customers that the prepayment was an advance payment for services that a customer could use, and that a customer would be misled into thinking they could use the full $20 on additional services outside their plan. The ACCC claimed that this representation was misleading, because at least $10 of the prepayment amount could never be used by customers, and would not be refunded to customers, based on the top-up and Forfeiture Term outlined above. The Court interpreted this as the ACCC attributing particular significance to TPG's use of the term "prepayment".

 

The Court did not agree with the ACCC's submissions that a reasonable and ordinary consumer would not read the full terms and conditions of the plan including the term relating to the prepayment. The Court held that a reasonable and ordinary purchaser of retail mobile, internet and home telephone services would take the time to review the contractual terms of importance in relation to their chosen plan, and would understand the term relating to prepayment, the top-up mechanism if the prepayment is used, and the subsequent forfeiture on termination of the plan. The term was therefore not found to be misleading.

 

Unfair contract terms

 

The ACCC claimed that the Forfeiture Term was an unfair contract term and was therefore void because it caused a significant imbalance in the parties' rights and obligations arising under the contract, in breach of the ACL. The ACCC claimed that this was the case because the effect of the term was that $10 of a customer's money could never be used for services and this is not disclosed to customers. This results in customers suffering a financial detriment.

 

TPG argued that, amongst other things, TPG customers made a payment for which they received the benefit of the right and flexibility to access and use services outside the included value of the services available for their plan. TPG also submitted that the Forfeiture Term is reasonably necessary to protect its interest in offsetting losses incurred for usage by customers outside their included plan.

 

The Court held that it was sufficiently apparent to a reasonable or ordinary consumer of telecommunication services that between $10 and $20 would be forfeited upon cancellation of their plan. The Court found that this was sufficiently disclosed in the terms and conditions, provided a benefit to customers, and the Forfeiture Term was sufficiently necessary to protect TPG's interests.

As a result, the ACCC did not succeed in its claim and costs were awarded against it.

 

Appeal

 

The ACCC will appeal the decision to the Full Federal Court.  Chairman of the ACCC Rod Sims, has stated that "consumer awareness of important terms should not be expected where they are contained in the fine print of a long and detailed contract, or in the case of online contracts, after multiple clicks".

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For further information, please contact:

 

Anita Cade, Partner, Ashurst
anita.cade@ashurst.com