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April 26, 2013

Case note: unconscionable conduct by mobile phone provider

In Australian Competition and Consumer Commission v Excite Mobile Pty Ltd [2013] FCA 350 the Federal Court decided that Excite Mobile Pty Ltd engaged in false and misleading and unconscionable conduct in its provision of mobile phone services to customers across Australia. The Court also found Excite Mobile acted unconscionably and used undue coercion when attempting to obtain payment for mobile phone services.

A large number of consumers across all parts of Australia were affected by Excite Mobile’s conduct, including consumers living in indigenous communities on the Cape York Peninsula, remote areas in Queensland and Western Australia, and throughout the Northern Territory.

Excite Mobile promoted its services through telephone marketing (telemarketing) calls by representatives of Lime India and other call centres in India, Pakistan and the Philippines. Lime India also attended to the customer service issues of Excite Mobile’s customers, attempted to collect unpaid accounts purportedly owed to Excite Mobile by customers, and entered information in relation to dealings with Excite Mobile’s customers into an electronic database, for and on behalf of Excite Mobile.

Excite Mobile provided Lime India with the scripts to be used in the telemarketing calls and directed the telemarketers to follow the scripts.

Potential customers were contacted by telemarketers who offered the customer an enticement to contract, namely the “gift” of a phone and holiday vouchers. The contracts offered were on a 24 month plan. The plans consisted of a minimum monthly fee, for which customers would receive a set daily allowance for calls and text messages, depending upon the size of their contract. The most commonly selected contract was the $33 per month plan, for which customers received a daily allowance for calls and text messages capped at $2.20. Any costs incurred outside of the cap would be added to the monthly bill.

The scripted explanation of the cap set out above was not included in any of the 10 recorded examples heard by the court. Instead the telemarketers simply said words to the effect of “[f]or only $33 you get $66 worth of calls.”

The terms that Justice Mansfield found to be unconscionable, in addition to the “day cap” clause included a $75 cool off fee that customers were required to pay, as well as a $195 charge imposed for returning a damaged phone, even if it was only the box that was damaged.

The Court found that:

  • Excite Mobile acted unconscionably in relation to the sales method it used to induce customers to enter into a 24 month mobile phone contract, the terms included in its mobile phone contracts and in Excite Mobile’s reliance upon, and enforcement of, those contractual terms;
  • Excite Mobile falsely represented to customers that mobile phone coverage was available at their home address when it was not, including to customers in remote indigenous communities where no coverage was available;
  • Excite Mobile created a fictional complaints handling organisation called “Telecommunications Industry Complaints” which deceived consumers into believing that complaints about Excite Mobile were being handled by an independent organisation;
  • Excite Mobile falsely represented that collection letters were from an independent debt collector using a false name adopted by a manager of Lime India and that the debt alleged to be owed to Excite Mobile had been referred for collection, when in fact there was no such independent debt collector and the letters were sent by Excite Mobile;
  • The telephone number included on the debt collection letters for customers to call was answered by an Excite Mobile director and employee who claimed to be from the independent debt collector's office. The Court found that they then induced or attempted to induce customers to pay the debt allegedly owed to Excite Mobile;
  • Excite Mobile made false representations in a number of the collection letters about the rights and remedies available to Excite Mobile in the event that legal proceedings were instituted against the customer. This conduct was considered to be unconscionable, and included false representations that to recover the alleged debt a court would make orders: requiring the customer to pay an additional charge equal to 20% of the customer’s alleged debt for failing to pay on time and for the repossession of all assets of value owned by the customer including children’s toys.

The language employed in the collection letters is strong and threatening. For example, the Times are Bad letters (the first of 6) include the following statement:

"Believe me there is no way you want to meet my lawyer in court. While she seems like a nice lady she is a killer in front of the judge. One case she even got the judge to order a young mother have her kids game machine repossessed. She has no feelings towards you at all. Her job is to be as mean as possible towards you. She can make your life extremely uncomfortable. "

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Posted 26th April 2013 by David Jacobson in Consumer Law, Marketing, Trade Practices