The Federal Court has found that Excite Mobile Pty Ltd has engaged in false and misleading and unconscionable conduct in its provision of mobile phone services to customers across Australia following action by the Australian Competition and Consumer Commission.
The Court also found Excite Mobile acted unconscionably and used undue coercion when attempting to obtain payment for mobile phone services.
Excite Mobile’s directors, Mr Obie Brown and Mr David Samuel were both found to have been directly knowingly concerned in Excite Mobile’s contraventions. Ms Fiona Smart, an agent of Excite Mobile, was also found to have been knowingly concerned in false representations made in relation to Excite Mobile’s debt collection conduct.
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.
Specifically, 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. Mr Brown and Mr Samuel were found to have been knowingly concerned in the unconscionable conduct of Excite Mobile;
- 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. Mr Samuel was not found to have been involved in making false representations about coverage;
- Excite Mobile, Mr Brown and Mr Samuel 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 in letters sent to at least 1074 of its customers, falsely represented that the letters were from independent debt collector Jerry Hastings or a representative, 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 Jerry Hastings debt collection letters for customers to call was answered by Ms Smart and Mr Brown who claimed to be from Jerry Hastings’ office. The Court found that Mr Brown and Ms Smart then induced or attempted to induce customers to pay the debt allegedly owed to Excite Mobile;
- By sending the 1074 debt collection letters in the name of Jerry Hastings and using the Jerry Hastings telephone number, Excite Mobile used undue coercion against consumers in relation to obtaining payment for mobile phone services.
- Excite Mobile made false representations in a number of these 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
In handing down his decision, Justice Mansfield considered the sales contract entered into between Excite Mobile and the customer to be “clearly unfair” and “to such a degree as to attract a strong adverse moral judgment”. Justice Mansfield also considered the marketing approach of Excite Mobile to be “cynically indifferent to the interests of its potential customers, and was unconscionable”.
Excite Mobile relied upon and enforced a “day cap” clause in its mobile contract, which in some cases only allowed a customer to make an approximately two minute call per day before being charged fees in excess of the monthly contract charge. The structure of Excite Mobile’s contracts meant that customers were very likely to incur high excess usage charges as the operation of this term was not adequately disclosed.
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.
“This is a landmark decision on unconscionable conduct,” ACCC chairman Rod Sims said.
“It also confirms the ACCC belief that the telecommunications sector must improve their standards in relation to the proper disclosure and clarity of key terms and conditions to consumers.”
“The conduct of Excite Mobile was outrageous. Inventing a fictitious complaints handling body to deceive customers and creating a fictitious debt collector to coerce the customer to pay an alleged debt to Excite Mobile is unjustifiable and unacceptable,” Mr Sims said.
The matter came to the ACCC’s attention via ICAN, the Indigenous Consumer Assistance Network. Further assistance was provided by CAALAS, the Central Australian Aboriginal Legal Aid Service.The ACCC will now seeking declarations that Excite Mobile contravened the Trade Practices Act 1974* and that its directors Mr Brown and Mr Samuel and its employee/agent Ms Smart were knowingly concerned in this conduct. The ACCC will also seek:
- pecuniary penalties;
- orders that Mr Brown and Mr Samuel be disqualified from managing a corporation for a period of five years;
- an order for findings of fact pursuant to section 83 of the Trade practices Act 1974; and
*On 1 January 2011 as part of Australian Consumer Law amendments the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010.