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On Wednesday 24 September, Justice O’Sullivan of the Federal Court delivered judgment approving a $100 million dollar penalty against Optus Mobile Pty Ltd (Optus) for the use of inappropriate and exploitative sales methods to sell telecommunications products to vulnerable customers, which the Court agreed amounted to unconscionable conduct.
On 31 October 2024, the Australian Consumer and Consumer Commission (ACCC) commenced proceedings against Optus for breaches of the Australian Consumer Law regarding inappropriate sales practices used between 2019 and 2023. These sales practices included inappropriate and exploitative debt collection practices, coverage check failures, undue pressure and influence on sales, failure to explain terms and conditions and identify verification failures. In Mount Isa, sales staff fraudulently entered into contracts with customers without the customers’ knowledge or consent. The majority of these customers were First Nations Australians living in remote communities. Optus was aware of the Mount Isa conduct as early as December 2019. Despite internal investigations, whistle blower reports and complaints to the Ombudsman throughout 2020, inappropriate conduct continued in Darwin stores between 2021 and 2023. In some of the most egregious cases, customers were sold plans despite living in areas where Optus reception was not available.
Justice O’Sullivan was highly critical of Optus’ conduct, noting that many of the sales practices were specifically deployed on vulnerable consumers, including people with mental disabilities, low financial literacy, learning difficulties and/or limited proficiency in English. Justice O’Sullivan labelled the conduct “appalling” and described the Agreed Statement of Facts as “sobering reading”.
Takeaway for insurers
In addition to the $100 million penalty, Optus has agreed to implement an extensive compliance policy to avoid the conduct being repeated in the future. This includes appointment of a consumer expert as a compliance advisor, appointment of a specialist care team for vulnerable customers and a new training and induction system for sales staff. Optus has also agreed to make a donation of $1 million to an organisation that facilitates First Nations digital literacy.
The question of which types of penalties are insurable is topical in financial lines markets, particularly where we continue to see a soft market and pressures for broader cover being sought. The telecommunications industry is currently a major focus for the ACCC. This is reflected in their 2025-2026 compliance and enforcement priorities, which include combatting misleading pricing in relation to essential services “with a particular focus on energy and telecommunications”. The regulator also identified conduct that impacts consumers experiencing vulnerability or disadvantage as a priority.
For insurers of telcos, we suggest that they factor into their pricing models the increased risk of regulatory prosecutions and higher penalties.
This is a timely reminder of the wide-ranging powers of the regulator to not only impose significant financial penalties, but also to force businesses to undertake remedial action in response to illegal conduct. With unfolding news of Optus outages and alleged failures to report outages, we can expect to see continued enforcement action taken against the telecommunications industry.
Insurance and reinsurance
Australia