Media Release 49/20

27thMarch 2020

1300 Australia to remove alleged unfair terms and refund excessive termination fees

https://www.accc.gov.au/media-release/1300-australia-to-remove-alleged-unfair-terms-and-refund-excessive-termination-fees

1300 Australia has undertaken to amend its current and future contracts with small businesses and will refund part of the termination fees paid by small business customers, as a result of ACCC's concerns that some of the contract terms were unfair.

The company sells 'phonewords', which are telephone numbers that also spell words on a keypad, such as '13 POOL' or '1300 PROPERTY'.

In a court-enforceable undertaking, 1300 Australia has acknowledged that some of the terms in its contracts may have been unfair and committed to amending its contracts.

1300 Australia has also committed to review previous complaints, refund excessive termination fees and implement an Australian Consumer Law (ACL) compliance program.

"Small businesses have less bargaining power, and we regularly hear concerns from small businesses about inequitable agreements with large businesses," ACCC Deputy Chair Mick Keogh said.

"In this case, we had concerns about unexpected costs, or obligations, as a result of 1300 Australia's contract terms."

The ACCC was concerned that the terms in various standard form contracts that were entered into, or renewed, by 1300 Australia since 12 November 2016, created a significant imbalance in the rights and obligations of small business customers and 1300 Australia, and were not reasonably necessary to protect 1300 Australia's interests.

"We were particularly concerned about contract terms which permitted 1300 Australia to renew a contract without notifying the customer, to charge unspecified penalties for late payments, and to charge significant termination fees. A small business could be required to pay a termination fee of up to 92.5% of the total contract fees if they canceled the contract early," Mr. Keogh said.

"We are pleased that 1300 Australia has committed to refund part of the termination fees paid by small business consumers who have complained to 1300 Australia since November 2016, where the termination fee paid exceeded more than 3 months' fees under their agreement for those contracts that were terminated after their initial term."

1300 Australia has undertaken to amend current and future agreements to ensure:

it will give customers 30 days' notice before renewing a customer's contract;

it cannot charge an administration fee for late payment of more than $25;

customers have 30 days to rectify a breach of the contract before 1300 Australia can terminate it;

customers can terminate the agreement with 3 months' notice, after the initial contract period, at no charge; and termination fees are limited to the equivalent of 3 months' fees, if less than 3 months' notice is given, after the initial contract period.

Background

1300 Australia was a subsidiary of Telstra Corporation until November 2017. The ACCC does not allege that Telstra is involved in the alleged conduct by 1300 Australia and has not engaged with Telstra on this matter.

In December 2019, 1300 Australia was acquired by a publicly listed telecommunications company, Uniti Group Limited.

Business to business unfair contract term laws came into effect in November 2016.

Reflect upon the case study provided, applying Toffler's three business ethics principles. In each case name the principle and briefly explain it and give an example(s) from the case study where you believe each principle might be breached.