SmartCompany, March 21, 2018
The Federal Court has fined an online directory service company $300,000 and its sole director $40,000 for breaching Australian Consumer Law, after the company admitted it was involved in systemic unconscionable conduct, undue harassment and making false and misleading representations when advertising its services.
ABG Pages Pty Ltd. was an online directory business that offered customers, including small businesses, listings on its website between 2009 and 2016. According to the Australian Competition and Consumer Commission (ACCC), the directory would sign businesses up for contracts and make it difficult to exit them before they renewed.
The ACCC first commenced court proceedings in December 2016, claiming ABG Pages had misled customers, harassed staff and refused to cancel contracts. ABG Pages admitted to the charges alleged by the ACCC in the Federal Court.
Alongside the combined $340,000 in penalties, the court forced ABG Pages and its sole director to jointly make a $25,000 contribution towards the ACCC’s costs. The company’s director was also made to attend an Australian Consumer Law compliance program and has been disqualified from managing corporations for five years.
Dr Michael Schaper, deputy chair of the ACCC, told SmartCompany ABG Pages made its business by ringing up businesses and offering unfair prices for its services.
“The listing prices ranged from $149 a month for twelve months through to $9000 for twelve months. I understand the leads for potential customers came through the internet and through cold calls,” Schaper says.
According to court documents, ABG Pages failed to explain the contracts it gave to customers included clauses that would renew and lock clients into another service period unless they opted out in time. When businesses attempted to exit the contract by providing notice, the court found ABG Pages refused to accept it.
“They’d say the contract has a clause that requires you to give 30 days notice before you cancel, so now you have to pay for year two,” Schaper says.
According to the court’s finding, ABG Pages also used high-pressure sales tactics, including excessive calls to clients to follow up payments. Schaper says one business was called 50 times in one day by ABG Pages, while another was contacted 993 times over a nine-month period.
Schaper says the directory also marketed its services by listing more well-known businesses including Telstra and Optus on its site in the hopes of winning over smaller clients, even though these larger businesses had no affiliation with ABG Pages. This is not an uncommon tactic to win prospective customers over, he says.
“We’ve had this in a number of other cases where firms try to get money out of businesses by explicitly or implicitly painting a picture that there’s not only a large number of subscribers but serious chunks of corporate Australia involved in the project,” Schaper says.
“If you say to an SME customer big businesses work with them, it increases the attractiveness of a potential customer.”
SmartCompany contacted ABG Pages but did not receive a response prior to publication. SmartCompany was unable to contact the company’s director prior to publication.
ACCC continues the hunt for unfair contracts
Back in November 2016, amendments to Australian Consumer Law added new protections for SMEs with fewer than 20 employees against unfair contracts that give one party more leverage over the terms and termination than the other.
The ACCC has taken action against a number of operators as a result of these changes and Schaper says the regulator is continuing its focus in this area. However, he says the ACCC cannot scrutinise every business contract signed, the onus also falls on business operators to take caution.
“We’ll continue to look at the unfair contract terms that have been in the book since November 2016. If a large business offers a small business a standard form contract that’s got clauses that aren’t reasonable or needed, they can be declared void,” he says.
Schaper says small businesses are disproportionately likely to fall victim to unfair contracts, however business owners can remain vigilant by scrutinising any contracts before signing on. This could include seeking out a third-party to analyse the agreement. In addition, Schaper says developing a marketing plan is useful, so businesses can be prepared to decline any offers when cold callers try to make contact.
“You need to have your marketing and promotion plan, so when people ring up out of the blue the first action is to say you don’t need it,” he says.
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