Telstra could pay up to $10 million in fines for allegedly misleading close to 100,000 customers over its premium direct billing (PDB) service.
The telco has jointly agreed with the Australian Competition & Consumer Commission to submit to the federal court that it pay a penalty over how the PDB service was managed.
The service was used by Telstra's mobile customers to purchase online content such as apps, games and entertainment from third parties over the network with costs charged to their phone bills. Some third parties signed up thousands of Telstra customers without their consent and without needing payment details or identity verification.
The ACCC estimates that Telstra earned up to $61.7 million on commissions from PDB services from 2.7 million mobile services.
“Telstra has admitted that it misled customers by charging them for digital content, such as games and ringtones, which they unknowingly purchased," said ACCC chairman Rod Sims.
"Many Telstra customers paid for content they did not want, did not use, and had difficulty unsubscribing from.
“Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases made without their knowledge or consent. Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers.”
He added that watchdog was aware that some carriers offered similar PDB services, and would take action if it believed other carriers were breaching the law.
Telstra ceased offering PDB services in August last year following an influx of complaints from customers finding unexpected charges on their phone bills.
In addition to the possible fines, Telstra agreed to refund affected customers and has already handed back at least $5 million in refunds. The telco said it would now handle PDB complaints directly instead of referring them to third parties, and would actively offer refunds to customers that may have been affected.
"It is clear for this specific type of service, we did not get that right,” said Telstra group executive of consumer & small business Vicki Brady.
“PDB services have been recognised as an issue for the broader telecommunications industry – Telstra took a number of steps to improve our processes but acknowledge we could have done more and done it faster.
“We apologise to our customers who have been charged for PDB subscription services they did not knowingly request or could not opt out of.”
The decision to scrap PDB services drew the ire of at least one third-party provider earlier this year. ASX-listed digital marketing firm Impelus threatened legal action against Telstra last month, saying that it had a continued obligation to provide PDB services and that it would lose out on between $550,000 and $680,000 in earnings as a result.
The federal court will make a decision Telstra's potential fine at a later date.