Austar Entertainment, the pay TV Company that Foxtel is trying to buy for $2.2 Billion, has admitted trying to stitch up consumers using dubious contracts. The Company has also been investigated for their door to door selling practices.The dubious contracts were exposed following an investigation by the Australian Competition and Consumer Commission who recently had concerns about the merger of Foxtel and Austar.
The ACCC said Austar contracts were likely to mislead consumers and breach Australian Consumer Law.
Following the investigation and in an effort to expedite a quick solution Austar has offered a court enforceable undertaking to provide clear and prominent explanations of the costs of its subscription television packages.
Late last month Austar chief executive John Porter tried to paint a bleak picture of the pay-TV market in an effort to overcome the concerns of the ACCC that the marriage of Austar and Foxtel would not create a monopoly.
Porter said “This is probably the most negative consumer environment we’ve ever seen. It seems that no matter what we throw at the customer to try to get them to act, they are still reticent, they are sitting on their hands.”
The ACCC said that the regional pay TV operator was investigated following door-to-door sales to Indigenous residents of Beswick and Barunga, remote communities in the Northern Territory.
“The ACCC is concerned the conduct affected some of the most disadvantaged consumers in Australia,” ACCC deputy chair Peter Kell said. “The ACCC’s investigation also revealed this behaviour occurred nationwide.”
Mr Kell said businesses must be crystal clear about costs when signing contracts as they have an obligation to deal fairly with their customers under the Australian Consumer Law.
Austar offered extra packages of channels (such as movies or sport) for free or at a discounted rate for a short introductory period at the beginning of a minimum-term contract on top of its standard ‘Starter Pack’.
Austar’s sales contracts represented the total minimum cost as that calculated on the cost of the ‘Starter Pack’ for 12 months plus the cost of any additional channels for the introductory period.
However Austar’s stated minimum cost did not reflect the fact that the customer would be charged for the extra channels at the end of the introductory period unless the customer actively opted out of the channels.
The undertaking commits Austar to state the minimum price of the contract to the customer before making any sale by door-to-door, telephone, kiosk or internet.
Austar will calculate the minimum price on the assumption customers will not vary their subscription after the date of the contract by opting to remove those channels previously offered for free.
Austar will also retain recordings of all telephone conversations with customers in which the cost of the package is discussed, and the contract is entered into, for the duration of the minimum term of the contract.