While New Zealand is still waiting for case law in relation to our unconscionable conduct prohibition (which came into force in 2022), the Australia Competition and Consumer Commission (ACCC) continues to take action under Australia's equivalent unconscionable conduct prohibitions (which have been part of Australia's consumer law regime for decades).
That includes the announcement yesterday that Optus has admitted engaging in unconscionable conduct by selling phones and mobile plans to vulnerable customers throughout Australia, and has agreed to pay a AU$100m penalty and provide court enforceable undertakings.1
Yesterday's announcement is in a similar vein to the 2021 case in which Telstra was fined AU$50m for unconscionable conduct for selling mobile contracts to indigenous consumers that they did not understand and could not afford.
The conduct admitted by Optus yesterday included the following:
- Staff putting undue pressure on consumers to purchase a large number of products, including expensive phones and accessories, that they did not want or need, could not use or could not afford.
- Staff failing to explain relevant terms and conditions to vulnerable consumers in a manner they could understand, resulting in them not understanding their ongoing payment obligations. For context, many of the affected consumers were vulnerable or experiencing disadvantage, such as living with a mental disability, diminished cognitive capacity or learning difficulties, being financially dependent or unemployed, having limited financial literacy or English not being a first language. Many of the consumers were First Nations Australians from regional, remote and very remote parts of Australia.
- Staff not having regard to whether consumers had Optus coverage where they lived.
- Staff selling products and services that Optus knew, or should have known, the consumers could not afford.
- Staff misleading consumers to believe that goods were free or included as part of a bundle at no additional cost.
- Optus engaging debt collectors to pursue some of these consumers after it had launched internal investigations into the sales conduct.
While some of the conduct of Optus' staff, and its licensees' staff, is plainly poor behaviour, there are also lessons for New Zealand businesses to be mindful of in instructing sales staff of the required standards.
It should also be noted that:
- one of the reasons for such a large penalty was that Optus’s senior management were increasingly aware that Optus staff were engaging in the inappropriate sales practices and that Optus’s systems and controls could not stop the conduct. Optus acknowledged it failed to promptly take steps to fix deficiencies in its systems, which allowed the conduct to continue. One example included pursuing debts arising from the unconscionable sales even after the senior management knew the contracts may have been formed without the knowledge of the affected customers;
- the ACCC also raised that the commission-based incentives for staff had the potential to incentivise the conduct.
The involvement or awareness of senior management, and the existence of incentive structures that risk incentivising poor conduct, would be highly likely to be aggravating factors in New Zealand.
The case is yet another reminder for New Zealand businesses of the importance of:
- appropriate training for all sales staff;
- having robust compliance systems in place to prevent both misleading conduct and unconscionable conduct; and
- having appropriate incentive structures in place for sales staff.
If you have any questions on New Zealand's unconscionable conduct laws, please contact one of the experts below.