Optus faces $100 million penalty in sales tactics case
Optus has admitted to engaging in unconscionable conduct in the sale of telecommunications goods and services to hundreds of consumers, following court proceedings initiated by the Australian Competition and Consumer Commission (ACCC).
According to details presented, between August 2019 and July 2023, sales staff at 16 different Optus stores across the country were found to have sold products, including mobile phones and contracts, to over 400 consumers, many of whom did not want, need, or could not afford the items.
The case predominantly involved vulnerable individuals, such as those living with mental disability, diminished cognitive capacity, learning difficulties, low financial literacy, unemployment, or limited English proficiency. Many affected were First Nations Australians residing in regional and remote communities.
As part of a proposal to the Federal Court, the ACCC and Optus will jointly request a total penalty of AUD $100 million be imposed on Optus for breaches of the Australian Consumer Law. The Court now has the responsibility to determine the appropriateness of the penalty and to impose any further orders.
Admission of conduct
Optus admitted that its staff engaged in a range of misconduct.
Examples included pressuring consumers to purchase multiple or high-cost products and accessories they did not want or need, failing to explain terms and conditions in an understandable manner, and not considering whether there was coverage in the consumers' area of residence.
In several instances, products and services were sold to individuals who could not afford them, or who were misled into believing items were free or included in bundles without extra charges.
Senior management at Optus became aware of these practices and acknowledged that internal systems were inadequate to prevent such conduct.
In several cases, debts linked to these sales were actively pursued by debt collectors, even after internal investigations had highlighted questionable sales practices.
"The conduct, which included selling inappropriate, unwanted or unaffordable mobiles and phone plans to people who are vulnerable or experiencing disadvantage is simply unacceptable," said ACCC Deputy Chair Catriona Lowe.
During the ACCC's investigation, numerous stories emerged detailing how these practices impacted consumers.
Ms Lowe elaborated, "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."
She added, "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."
Ms Lowe further stated, "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."
She continued, "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."
Impact and examples of conduct
One cited example involved a First Nations consumer from a remote community, who, after being approached and pressured by Optus staff outside a store, was contracted into multiple phone and device plans worth over AUD $3,800 over 24 months, despite not having Optus coverage at home and not understanding the terms.
False information was also entered into their credit check, and the resulting debt was referred to collectors, resulting in repeated contact by debt agencies.
Another case involved a consumer living with an intellectual disability, whose sole income was the disability support pension. Accompanied by a support worker to purchase a modest pre-paid recharge, they were pressured into multiple contracts totalling over AUD $8,000 over three years.
Staff added a false ABN to facilitate credit checks.
The issue was only resolved after the involvement of a community legal centre.
A 2019 Optus investigation into its Mount Isa store found instances where staff had falsified identification documents and consumer details to create contracts, often using the identities of First Nations consumers without their knowledge. The misconduct was identified in at least 82 contracts. Optus subsequently referred related debts to third-party collections, resulting in some consumers facing threats of legal action and negative credit reporting.
Undertakings and changes
Optus has agreed to both compensatory measures and procedural reforms.
The company will provide remediation to affected parties, has commenced compensating impacted consumers, and will deliver compensation claims through a clearer resolution process. Optus also committed a AUD $1 million donation to a group facilitating digital literacy for First Nations Australians.
The company will implement changes to its complaint handling processes, staff training, debt collection practices, and other relevant systems.
A significant feature of the new protocol includes restructuring staff remuneration to reduce the likelihood of similar conduct, moving away from commission-based sales incentives. Optus has also commenced purchasing back 34 licensee stores in the Northern Territory, Queensland, and South Australia.
The recent action against Optus follows the precedent set in 2021 when Telstra was ordered to pay a AUD $50 million penalty following unconscionable conduct towards Indigenous customers under similar circumstances.
The ACCC's action originated from a referral by the Telecommunications Industry Ombudsman after repeated concerns about Optus's practices were raised through advocacy and support channels for vulnerable consumers.
