Telstra fined $10 million for misleading customers over games and ringtones

TELSTRA has been hit with a record penalty after it signed its customers up for ringtones and games without their knowledge.

TELSTRA has been fined $10 million after it signed up as many as 100,000 customers for ringtones, gaming and other digital content without their knowledge.

The Australian Competition and Consumer Commission (ACCC) announced the penalty on Thursday after the Federal Court found “that Telstra misled customers and breached the ASIC Act when it charged them for digital content, such as games and ringtones, which they unknowingly purchased”.

More customers could be impacted and not know it. The ACCC expects the cost the telco will be “much higher” after customers are reimbursed, estimating another $5 million setback.

It is the highest fine ever levelled under Australian consumer law, equal to a similar judgment against Coles.

“It illustrates just how serious and aggregious their conduct was,” ACCC chairman Rod Sims told ABC News Radio.

The court found that in 2015 and 2016, Telstra did not adequately inform customers it had set a third-party billing service, known as Premium Direct Billing, as a default on their mobile accounts. If customers accessed content through this service, even unintentionally, they were billed directly by Telstra.

“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,” Mr Sims said in a statement.

“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.”

Mr Sims said the penalty was a “good result” for consumers after Telstra had treated their customers “very badly”.

“All you had to do was one click and you were held to the service,” he said.

The consumer watchdog started proceedings against Telstra after the nation’s largest telco both permitted and profited from the service.

After receiving an “enormous number of complaints” — sometimes in excess of 10,000 per month — Telstra admitted that more than 100,000 customers may have been affected and has committed to offer refunds to these customers.

“We took the action because there were many complaints about this service. It’s disappointing,” Mr Sims said.

Telstra customers are encouraged to check their Telstra mobile account and, if they believe unauthorised charges have been applied under the PDB service, they should contact Telstra to seek a refund.

Mr Sims said Telstra had so far reaped $62 million in revenue from 2.7 million mobiles.

Telstra says it has already provided $5 million in refunds and will contact customers it identified. It has stopped operating the PDB service entirely.

— View the full statement from the ACCC here.

Originally published as Telstra fined $10 million for misleading customers over games and ringtones