Telstra fined $50m for ‘systemic’ targeting of vulnerable customers

“The affected consumers were particularly vulnerable, and sales staff took advantage of their vulnerabilities and Telstra’s comparatively superior bargaining power to engage in the unconscionable conduct,” Justice Mortimer wrote in her judgment.

She acknowledged the company’s directors were not aware of the practices but said senior management was repeatedly told of the issue and did not adequately act to stop the misconduct.

“Telstra did not have or implement effective systems or training to prevent the improper sales practices, or to properly respond when complaints were subsequently made,” she said.

Telstra was aware that its licensees paid financial rewards to sales staff and that this system had the potential to encourage the improper sales practices.

— Justice Debra Mortimer

“In my opinion the penalty must be such that Telstra understands it needs to react differently, more proactively and more promptly to complaints and investigations, especially where those drawing its attention to problems are reputable organisations, including reputable consumer organisations,” she said.

The judge said the staff concerned needed to take responsibility for their misconduct.

“As individuals, they bear considerable personal responsibility for the unconscionable conduct, for the predicaments then experienced by affected consumers, and, at least in many cases, the distress, embarrassment and anxiety caused by the accrual of debts.

“None of these contraventions can occur without individuals deciding, or agreeing, to be the ones who unconscionably encourage, persuade or cajole vulnerable consumers to enter into such contracts, with or without false representations.”

Justice Mortimer said senior executives knew of risks posed by the bonus system from at least March 2017.

“The system of sales targets and financial incentives for Telstra stores required, and incentivised, greater numbers of sales of post-paid services than pre-paid services,” she wrote.

“Telstra was aware that its licensees paid financial rewards to sales staff and that this system had the potential to encourage the improper sales practices.”

The maximum penalty available for the court to order was $131 million but Justice Mortimer accepted the lower offer as many of the contraventions overlapped and in light of Telstra’s “public apology and its high level of co-operation in these proceedings”.

Telstra CEO Andy Penn has said that while “only a small number of licensee stores did not do the right thing”, the “impact on these vulnerable customers has been significant” and he planned to hold the company to account.

“I have spoken often about doing business responsibly including about these failings since earlier [in 2020]. I am determined we have a leadership position and hold ourselves accountable in this regard,” he said.

ACCC chairman Rod Sims described Telstra’s misconduct as “truly beyond conscience”, saying the steep penalty was “appropriate given the nature of the behaviour by Australia’s biggest telco”.

Mr Sims slammed Telstra for “exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers”, and condemned the board and senior executives for “failing to act quickly enough to stop these illegal practices”.

Only car maker Volkswagen has been ordered to pay a higher consumer law penalty – $125 million – over the 2015 emissions scandal. The company is appealing the penalty.