Telstra to Pay $10 Million Penalty for Misleading Conduct Related to Premium Direct Billing Service

Monday 30 April 2018 @ 11.44 a.m. | Corporate & Regulatory | Legal Research

On 26 April 2018, the Federal Court ordered Telstra Corporation Ltd (‘Telstra’) to pay penalties for making misleading representations to customers in the case of ACCC v Telstra Corporation Ltd [2018] FCA 571. Telstra was ordered to pay penalties for making false or misleading representations to customers related to the company’s Premium Direct Billing Service (‘PDB service’).


Telstra had supplied the PDB service to domestic and business customers since 2013. The service enabled customers to purchase subscriptions to digital content supplied by third parties, and have the charges for the content billed to their subscription account with Telstra. This third party content included premium content services such as news websites, and downloadable applications. During the period from July 2013 to the present, Telstra did not inform its customers that the PDB service was a default setting on Telstra mobile services, and also failed to notify customers that if they were to purchase content on their mobile devices, they would be billed directly by Telstra via the PDB service.

A significant amount of customers complained that they had incurred charges without their knowledge or consent. This occurred in circumstances where Telstra did not require customers purchasing subscriptions to complete any identity verification, sign into an account, provide a password, or provide payment details.

The Australian Competition and Consumer Commission ("the ACCC") commenced proceedings against Telstra, alleging that Telstra had made false or misleading representations in relation to financial services, which contravened section 12DB of the Australian Securities and Investments Commission Act 2001 (CTH) (‘the ASIC Act’). The ACCC brought the action under the ASIC Act because they sought a declaration that the PDB was a financial service within the meaning of the ASIC Act. Telstra admitted that the PDB service was a financial service, that it had made the alleged representations which were false or misleading, and thereby contravened the provisions of the ASIC Act.

Orders and Penalties

Justice Moshinsky, sitting alone, held that Telstra misled customers and breached the ASIC Act by charging them for digital content. In addition, the Court held that Telstra did not adequately inform customers that it had set up the PBD service by default on their accounts with Telstra.

Justice Moshinsky ordered penalties totalling $10 million and issued a declaration that the PDB service was a financial service within the meaning of the ASIC Act. He referred to applicable principles for pecuniary penalties found in section 12GBA(2) of the ASIC Act:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;
(b)    the circumstances in which the act or omission took place; and
(c)    whether the person has previously been found by the Court in proceedings under Subdiv G (of Pt 2, Div 2) to have engaged in any similar conduct.

Justice Moshinsky stated:

“In summary, in my view, the conduct is at the serious end of the spectrum of contraventions of the false or misleading representation provisions of the ASIC Act. The proposed penalties reflect the seriousness of the offending and should operate as a deterrent against such conduct being engaged in by Telstra or other companies in the future. Accordingly, I will make orders for pecuniary penalties in the amounts proposed by the parties.” [89]

Response to Case

Telstra has ceased operating the PDB service entirely and will now refund customers who have been affected.

In a media release, ACCC Chairman Rod Sims said:

“Thousands of Telstra mobile phone customers unwittingly signed up to subscriptions without being required to enter payment details or verify their identity. By introducing and operating the Premium Direct Billing service, Telstra generated substantial profits by exposing customers to unauthorised charges.” 

He further stated that even children would have also been at risk of inadvertently subscribing to the service on a family member’s phone, noting that the penalty reflected this consideration:

“Telstra was aware that children were at risk of inadvertently subscribing on a family member’s phone. The $10 million penalty imposed by the Court recognises the seriousness of Telstra’s conduct. In the ACCC's view, such conduct falls below community expectations for appropriate corporate behaviour.”

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ACCC v Telstra Corporation Ltd [2018] FCA 571.

[media release] ACCC, ‘Telstra to pay $10 million for misleading premium billing charge representations,’ 26 April 2018. 

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