InCompetition - TPG

ACCC pays the price – TPG wins against the ACCC in prepayment case, again

Published On 24/08/2020 | By Stephanie Swan | Consumer protection, Litigation

The Full Federal Court has unanimously dismissed the ACCC’s appeal against TPG Internet Pty Ltd (TPG) in relation to the marketing and sale of TPG’s mobile, internet and home telephone services plans with a “prepayment” of $20.

Prepayment mechanism

In order to enter into a plan with TPG, consumers were required to make a prepayment of $20 for the use of services that were in addition to the included value of the plan acquired. If usage charges were incurred by the customer for those services not within the included value of the plan, TPG would deduct this amount from the customer’s prepayment balance.

The terms of TPG’s plans stipulated that when the prepayment balance fell below $10, TPG would automatically debit an amount from the customer’s account to bring the prepayment amount back up to $20. When a customer cancelled their plan, any unused balance of the prepayment (which would be a minimum of $10 and a maximum of $20) was retained by TPG (Forfeiture Term).

At first instance

The ACCC alleged at trial that:

  • TPG’s description of the prepayment on its website and in brochures involved misleading conduct in breach of sections 18 and 34 of the ACL, or false or misleading representations in breach of sections 29(1)(b), (g) and (i) of the ACL); and
  • the prepayment terms were unfair and therefore void under section 23 of the ACL.

The trial judge dismissed the ACCC’s case on both points, and the ACCC appealed in relation to the misleading conduct issues only (and not the unfair terms aspects).

On appeal

The ACCC alleged on appeal that TPG’s advertising material made two representations (the Prepayment Representations):

  • that the “prepayment” was an advance payment for services that the customer could in fact use, and the full amount could be used for telecommunications services before the customer cancelled their plan; and
  • that the purpose of holding the “prepayment” funds was to apply them to the payment of telecommunications services and that, if the prepayment was not required for that purpose, it would be returned in full to the customer.

The ACCC alleged that the Prepayment Representations were false or misleading because, on the cancellation of the plans, the balance of the prepayment was forfeited to TPG.

TPG argued that the word “prepayment” merely conveyed that the relevant payment was made in advance of a relevant supply (and not that the prepayment was able to be used in its entirety). In any case, TPG submitted that any such impression was dispelled by the clear disclosure of the Forfeiture Term within the terms and conditions for its plans.

The Full Court dismissed the ACCC’s appeal with costs.

The Full Court held that the word “prepayment” in itself “is silent on how any balance of the prepayment would be treated at the end of the contract.  If a consumer wished to know what would occur at the end of the contract, they had to read further.”  While their Honours expressed the view that the Forfeiture Term could possibly have been made clearer, it was not false or misleading.

What’s the applicable test?

The Full Court stated that the “central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error”, and noted that a number of subsidiary principles have been developed, including that:

where the impugned conduct is directed to the public generally or a section of the public, the question whether the conduct is likely to mislead or deceive has to be approached at a level of abstraction where the Court must consider the likely characteristics of the persons who comprise the relevant class to whom the conduct is directed and consider the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful …

The trial judge also referred to “a further or alternative test for whether conduct that is directed to the public generally or a section of the public is misleading: whether a significant number of persons to whom the conduct is directed would be led into error”.  On appeal, TPG relied on this test, submitting that it was necessary for the ACCC to show that a “not insignificant number” of reasonable persons within the relevant class of persons have been misled or deceived or are likely to be misled or deceived.

While the Full Court’s decision did not turn upon it, the Full Court, having evaluated the relevant authorities in depth, “consider[ed] it appropriate to record our view that the [not insignificant number] test is, at best, superfluous to the principles stated by the High Court in Puxu, Campomar and Google Inc and, at worst, an erroneous gloss on the statutory provision.”  Whether or not speaking of a reasonable member of a class implies that one is speaking of a significant proportion of that class, the Full Court held that “nothing in the language of the statute requires the court to determine the size of any such proportion”.

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About The Author

is a Solicitor in the Melbourne office of King & Wood Mallesons.

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