Watchdog’s case against telcos which misled small businesses fizzles out

A long running legal battle between the competition watchdog and a group of telcos and finance companies that allegedly tricked small businesses into taking on inflated equipment leases has limped to an end.

The Federal Court made declarations last week against seven people and two companies, but it did not impose any penalties or require any corrective action.

The court found that the company formerly known as Clear Telecoms (Aust) Pty Ltd engaged in both misleading and deceptive conduct and third line forcing through the sale of bundled deals of telecommunication services and equipment rental agreements to two small businesses in 2008.

The businesses who took up the bundled offers were enticed to do so through the offer of free equipment and call credits and were unaware that they were being signed up to a rental contract for the equipment with an unrelated finance company.

The Australian Competition and Consumer Commission (ACCC) originally instituted proceedings in 2008 against 28 respondents, including other telecommunications companies.

Although the court did not impose any penalties on the companies the competition watchdog still claimed the Federal Court’s ruling as a victory with ACCC Chairman Rod Sims issuing a statement saying the case was the culmination of a number of activities by the ACCC to stop this type of conduct.

“The ACCC is pleased to see that these types of misleading sales practices are no longer common in the industry. Many of the telecommunication companies that were engaging in this type of conduct have stopped trading and left the industry,” Sims said.

“Since we became aware of the conduct we have spent considerable time not only on court proceedings but in educating small businesses to better protect themselves.”

“Bundled telecommunications deals in general may be useful for some businesses. But business operators who are being offered such deals should do their homework first. Know exactly how much the deal will cost overall, what happens to any equipment at the end of the lease, who the parties involved are and if you can choose your own finance company”.

“Business operators should be wary of salespeople who are not upfront with important information and if they believe a salesperson is attempting to mislead them they should inform the telecommunications and finance companies being represented. No business these days can afford to have sales representatives who are not doing the right thing by potential customers.”

The court declared that former directors of Axis Telecoms George Tawaf and Mark Nesbitt, Axis employee John Masia, WorldTel directors Manoel Wehbe and Fakhr Fakhr, and WorldTel employees Romeo Wehbe and Joseph Ayoub knowingly breached the Trade Practices Act. All were banned for five years from promoting or conducting businesses offering credits for telco services when those credits also required equipment leases.