Australian Competition and Consumer Commission v TPG Internet Pty Ltd

Federal Court of Australia|2022-11-11|Before: Moshinsky J

The respondent, TPG Internet Pty Ltd (TPG), between 1 April 2019 and 30 April 2020, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law (ACL) (which is Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA)) by reason of it: (a) publishing on its website and in its direct marketing material: "FTTB/N/C speeds to be confirmed when active"; (b) publishing on its website: "If you are in an FTTN or FTTB area, we'll inform you of your line sync speed after activation"; (c) publishing on its website: "For NBN customers on FTTN/B/C technologies, our team will confirm your speed with you upon activation"; (d) publishing on its website: "For FTTB, FTTN and FTTC customers, we will inform you of your maximum line sync speed once available", and thereby representing that, for customers who acquired services from TPG using NBN fibre-to-the-node (FTTN) technology on plans configured to either the 50/20 Megabits per second (Mbps) NBN Speed Tier (NBN50 Speed Tier) and 100/20 or 100/40 Mbps NBN Speed Tier (NBN100 Speed Tier) (separately, the NBN50 TPG plan and NBN100 TPG plan, and together, the TPG plans), TPG would check and confirm their line's maximum attainable speed (MAS): (e) within a reasonable time after their line or service was activated and the MAS data was available to TPG; or (f) within a reasonable time after their line or service was activated, (together, the MAS Checking Representations), in circumstances where: (g) TPG did not have in place adequate systems, processes and policies to ensure that the MAS Checking Representations would be fulfilled; and (h) TPG thereby did not have reasonable grounds for making the MAS Checking Representations, which were representations with respect to a future matter, and which are taken to be misleading under s 4 of the ACL; and in fact, TPG failed to check or confirm the line's MAS for: (i) 1,424 customers on the NBN50 TPG plan and NBN100 TPG plan - within 3 weeks of activation of their line or service; and (j) 631 customers on the NBN50 TPG plan and NBN100 TPG plan - at all.

TPG pay pecuniary penalties to the Commonwealth of Australia in the total sum of $5,000,000 in respect of the contraventions of ss 29(1)(g) and 29(1)(m) of the ACL referred to in paragraphs 3 and 4 above.
Pursuant to s 246(2)(b) of the ACL, TPG establish and maintain a compliance program in accordance with the terms of Annexure A to this order.
TPG pay $50,000 as a contribution to the applicant's costs of and incidental to the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 11 November 2022, I made declarations and orders substantially in the terms proposed by the parties, including declarations that the respondent, TPG Internet Pty Ltd (TPG), contravened ss 18 and 29 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth), and orders that TPG pay pecuniary penalties to the Commonwealth of Australia in the total sum of $5 million, establish and maintain a compliance program, and pay $50,000 as a contribution to the costs of the applicant (the ACCC). These are my reasons for making the declarations and orders. 2 The hearing of this proceeding took place on 21 September 2022. This proceeding is one of three proceedings commenced by the ACCC against telecommunications companies in relation to representations that they made to consumers about residential broadband internet plans. The other two proceedings involve Optus Internet Pty Ltd (VID 444 of 2021) (the Optus proceeding) (which was heard on 10 November 2022) and Telstra Corporation Ltd (VID 445 of 2021) (which was also heard on 10 November 2022). In each case, the parties reached agreement on proposed declarations and other orders, including pecuniary penalties, and made submissions in support of the proposed declarations and orders at the hearing. In each case, on 11 November 2022, I made declarations and orders. 3 The material before the Court in this proceeding includes a statement of agreed facts prepared by the parties, dated 14 September 2022 (SOAF). A copy of the SOAF is annexed to these reasons for judgment. I accept as correct the statements contained in the SOAF and make findings in accordance with that document. 4 Also before the Court is an affidavit of Andrew O'Connor dated 14 September 2022. Mr O'Connor is the General Manager - Fixed Broadband of TPG Telecom Ltd, the ultimate holding company of the respondent. His affidavit provides evidence that is in addition to the material in the SOAF, and includes a statement on behalf of TPG that: (a) TPG accepts that it fell short of its consumer law obligations; (b) TPG deeply regrets that by reason of not having in place adequate systems, processes and policies to ensure that the relevant representations would always be fulfilled, some of TPG's customers did not receive information about their respective line's performance or remediation options, which they ought to have received in line with TPG's representations; and (c) TPG is committed to ensuring that it meets its regulatory obligations in the future. To that end, TPG has taken significant steps to improve its compliance processes and training relating to the maximum attainable speed (MAS) of its customers' lines and has also consented to the compliance orders proposed in this proceeding. 5 Mr O'Connor's affidavit also provides a detailed and helpful explanation of the deficiencies in systems and processes that led to the contraventions, and the steps that have been taken by TPG since discovering the deficiencies. Mr O'Connor was not required to attend for cross-examination, and I accept his evidence. 6 During the period 1 April 2019 to 30 April 2020 (the Relevant Period), TPG was a wholly-owned subsidiary of TPG Corporation Ltd (as it is now known). In July 2020, TPG Corporation Ltd was acquired by Vodafone Hutchison Australia Pty Ltd. The merged entity is named TPG Telecom Ltd. TPG is now a wholly-owned subsidiary of TPG Telecom Ltd. 7 The parties prepared and filed written joint submissions. In preparing these reasons, I have drawn substantially on those submissions.

Overview of the case and the contravening conduct 8 During the Relevant Period, on its website and through direct marketing material, TPG offered fixed line residential broadband internet services that TPG provided to customers using the National Broadband Network (NBN), including broadband internet services provided using NBN fibre-to-the-node (FTTN) technology. In connection with the supply of those internet plans, TPG made certain representations to customers as described below. 9 NBN Co Ltd (NBN Co) controlled part of the telecommunications infrastructure on which TPG's NBN FTTN broadband customers (TPG's customers) relied to access the internet. The telecommunications infrastructure that NBN Co relevantly controlled lay between individual customers' premises and "Points of Interconnect" between the NBN and TPG's retail service provider network, which in turn connected to the wider internet. 10 NBN Co offered wholesale broadband services to TPG during the Relevant Period, by which NBN Co provided access to NBN infrastructure, in a range of "megabits per second" (Mbps) bandwidth profiles. For example, a 25/5Mbps bandwidth profile provided a maximum download speed (being towards the customer) of 25Mbps and a maximum upload speed (being from the customer) of 5Mbps. The bandwidth profiles offered by NBN Co during the Relevant Period included 50/20Mbps (NBN50 Speed Tier) and 100/20Mbps or 100/40Mbps (NBN100 Speed Tier) (together, the NBN Speed Tiers). 11 TPG relevantly provided broadband internet services to customers during the Relevant Period using NBN FTTN technology on plans described as: (a) "NBN50 - Standard Plus" for internet access with a maximum underlying speed of the NBN50 Speed Tier (NBN50 TPG plan); and (b) "NBN100 - Premium" for internet access with a maximum underlying speed of the NBN100 Speed Tier (NBN100 TPG plan) (together, the TPG plans). 12 To provide those services, and on behalf of TPG's customers, TPG arranged that NBN Co would: (a) activate the "line" by which a customer accessed the internet (unless the customer's line was already activated); and (b) apply a "line profile" which limited the maximum download and upload speeds on that line so that they did not exceed the NBN Speed Tier for the TPG Plan chosen by the customer. 13 The MAS of the line over which a broadband internet service is provided to a customer is a physical limitation which caps the customer's internet speed, regardless of the underlying NBN Speed Tier of the TPG plan they have purchased. The MAS of a customer's line depends on, among other things, the length and quality of the copper wires that form part of the infrastructure over which broadband internet services are provided to the customer's premises. 14 If the MAS of a customer's line (in respect of either download or upload speeds) is lower than the maximum speed of the NBN Speed Tier underlying their plan, the customer's line speed is limited to that MAS and cannot support the NBN Speed Tier offered as underlying their TPG plan. 15 The maximum underlying speeds of the TPG plans were 50Mbps for downloads and 20Mbps for uploads (for the NBN50 TPG plan) and 100Mbps for downloads and 40Mbps for uploads (for the NBN100 TPG plan), respectively. Therefore, by way of example: (a) If a customer acquired an NBN50 TPG plan but had a line with a MAS of 35Mbps for downloads, their line could not "support the speed tier", being the underlying NBN50 Speed Tier. But, conversely, the same customer would have attained speeds less than their line's MAS if they acquired the next lower NBN TPG plan, being a 25/5Mbps plan. (b) If a customer acquired an NBN100 TPG plan but had a line with a MAS of 75Mbps for downloads, their line could not "support the speed tier", being the underlying NBN100 Speed Tier. But, conversely, the same customer would have attained speeds less than their line's MAS if they acquired the lower NBN50 TPG plan. 16 In summary, during the Relevant Period, TPG represented in statements made on its website and in its direct marketing material that: (a) for customers who acquired a TPG plan, TPG would check and confirm the MAS of the customer's line at one of the following times (depending on the statement made by TPG): (i) within a reasonable time after their line or service was activated and the MAS data was available to TPG; or (ii) within a reasonable time after their line or service was activated (together, the MAS Checking Representations); (b) TPG would inform a customer of their line's MAS at one of the following times (depending on the statement made by TPG): (i) within a reasonable time of NBN Co providing TPG with the MAS data, which would occur around 3 weeks after their line or service was activated; (ii) within a reasonable time after their line or service was activated and the MAS data was available to TPG; or (iii) within a reasonable time after their line or service was activated (together and individually, the MAS Notification Representations); and (c) TPG would provide a customer whose line was incapable of supporting the underlying NBN Speed Tier with alternative options at one of the following times (depending on the statement made by TPG): (i) within a reasonable time of NBN Co providing TPG with the MAS data, which would occur around 3 weeks after their line or service was activated; (ii) within a reasonable time after their line or service was activated and the MAS data was available to TPG; or (iii) within a reasonable time after their line or service was activated (together and individually, the MAS Remedy Representations). 17 The MAS Checking Representations, the MAS Notification Representations and the MAS Remedy Representations were each representations as to future matters for the purposes of s 4 of the ACL. 18 TPG did not have reasonable grounds for making the MAS Checking Representations, the MAS Notification Representations and the MAS Remedy Representations, for the following reasons: (a) TPG's automated systems were configured in a deficient manner as described in the SOAF; and (b) TPG did not otherwise have in place adequate systems, processes, and policies during the Relevant Period to ensure that the MAS Checking Representations, the MAS Notification Representations and the MAS Remedy Representations would always be fulfilled. The representations were therefore taken to be misleading pursuant to s 4 of the ACL. 19 Further, by making the statements that gave rise to the MAS Checking Representations, the MAS Notification Representations and the MAS Remedy Representations, and by issuing monthly bills to customers, during the Relevant Period, TPG represented to customers who had not been notified of their line's MAS that their line was capable of supporting the underlying NBN Speed Tier of their TPG plan (the Line Capability Representations). 20 During the Relevant Period, TPG failed to: (a) check and confirm the MAS of: (i) 631 customers who acquired TPG plans; and (ii) 1,424 customers who acquired TPG plans, until 3 or more weeks after activation of their line or service; and (b) issue MAS notifications to: (i) 2,460 customers who acquired TPG plans and who had lines that were incapable of supporting the NBN Speed Tier underlying their plan; and (ii) 1,152 customers who acquired TPG plans and who had lines that were incapable of supporting the NBN Speed Tier underlying their plan, until more than 3 weeks after activation of their line or service; and (c) offer remedies to: (i) 2,599 customers who acquired TPG plans who had lines that were incapable of supporting the NBN Speed Tier underlying their plan; and (ii) 1,103 customers who acquired TPG plans who had lines that were incapable of supporting the NBN Speed Tier underlying their plan, until more than 3 weeks after activation of their line or service. 21 Further, 288 existing TPG customers who had previously chosen the NBN50 TPG plan but whose line's MAS could not support the NBN50 Speed Tier, who subsequently sought to be upgraded to the NBN100 TPG plan, were moved by TPG to the NBN100 TPG plan despite the incapability of their line's MAS to support even the NBN50 Speed Tier. TPG did not then notify them that their line was incapable of supporting the underlying NBN Speed Tier or offer them any remedy. 22 TPG has admitted that: (a) by making the MAS Checking Representations and the MAS Notification Representations without reasonable grounds, TPG engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; (b) by making the MAS Remedy Representations without reasonable grounds, TPG engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL, and made false or misleading representations concerning the existence or effect of a condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL; (c) by making the Line Capability Representations, TPG engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, as to the nature, characteristics or the suitability for purpose of the TPG plans in contravention of s 18 of the ACL, and made false or misleading representations that the TPG plans had performance characteristics, uses or benefits in contravention of s 29(1)(g) of the ACL.

Applicable principles 23 I refer to and adopt the statement of the applicable principles (including the statutory provisions relating to the imposition of pecuniary penalties) set out in my judgment in the Optus proceeding: see Australian Competition and Consumer Commission v Optus Internet Pty Limited [2022] FCA 1397 (ACCC v Optus) at [15]-[21] and [24]-[36]. That judgment was handed down shortly before, and on the same day as, this judgment. 24 As in the Optus proceeding, the impugned conduct the subject of this proceeding occurred after 1 September 2018. 25 The benefit obtained by TPG from the contravening conduct cannot be determined. The maximum penalty per contravention is therefore $10 million or 10% of the annual turnover of TPG in the 12 months before each contravention, whichever is greater.

Declarations 26 The parties have proposed declarations that reflect the agreed contraventions as summarised above. 27 I am satisfied that the contraventions that are the subject of the proposed declarations are established by the facts and admissions set out in the SOAF. 28 I consider it appropriate to make declarations substantially in the terms proposed by the parties. The preconditions for the making of declarations, set out in ACCC v Optus at [18], are satisfied. In particular, I am satisfied that: there is a real and not a hypothetical question; the applicant has a real interest in raising the question; and there is a proper contradictor.

Civil penalties 29 The parties submit that the proposed penalty of $5 million is appropriate and should be imposed by the Court. They submit that: a penalty of this amount is appropriately tailored to the gravity of the contraventions in all the circumstances and is sufficient to achieve specific and general deterrence; this level of penalty will send a clear message of deterrence to TPG and the business community more generally about the importance of ensuring that representations made to customers in connection with critical information about the performance characteristics of essential services, such as broadband internet services, are accurate; and this assists in ensuring that customers are able to make informed decisions about their internet services. 30 The parties' joint submissions, at [115]-[166], set out detailed reasons in support of the proposed penalty of $5 million. Having regard to those submissions, which I accept, I am satisfied that the proposed penalty is appropriate in the circumstances of this case, and meets the objectives of specific and general deterrence. In particular, I note the following matters. 31 For residential customers, understanding the features of advertised broadband services and the quality of services that they actually receive may be complex, confusing and time consuming. Speed is a key consideration when choosing an internet plan and is a key differentiating factor between plans and pricing. Being provided with accurate information about internet speed is important for consumers to make an informed choice as to the services that may best suit their needs. 32 Customers who paid for plans with underlying speeds materially above their MAS may have suffered loss by reason of them paying for speeds which could not be attained on their lines. Some customers would have been better off paying for a plan on a lower NBN Speed Tier either with TPG or another provider, or obtaining internet services that used other technology altogether either with TPG or another provider. At the same time, it cannot be assumed that a customer would choose to shift to lower speed plans or an alternative access technology simply because their MAS is less than the maximum upload or download speed of the customer's NBN Speed Tier. This is because the MAS of a line may still be materially higher than the next lowest NBN Speed Tier. For example, where the MAS for a customer is a download speed of 80Mbps, the customer may wish to acquire the NBN100 Speed Tier, rather than opting for a NBN50 Speed Tier, because the latter would cap the customer's download speed at 50Mbps, materially below their MAS. 33 By its conduct, TPG diminished genuine consumer choice and may have affected decisions made by those TPG customers who were not notified of their MAS or their remedies, and who may have acted on the mistaken belief that their internet service had particular performance characteristics (being that it was supported by the underlying NBN Speed Tier) as well as other customers who may have chosen a particular TPG plan over other TPG plans or plans of other providers. 34 Although TPG was aware of the technical features and limitations of the automated system described in [16] of the SOAF (the MAS System), TPG did not appreciate that: (a) NBN Co might not supply valid MAS data within 30 days of the activation of a TPG customer's line; and (b) some emails were not sent in circumstances where they ought to have been sent. 35 Further, the reason that emails were not sent to existing customers was because the MAS System was intended to focus on new customers. It was designed by TPG to ensure that TPG would comply with the requirements of an undertaking that it gave to the ACCC on 20 December 2017 (see further below), insofar as TPG understood those requirements related to "future consumers" (i.e. new customers). 36 Therefore, TPG's contraventions were not deliberate, but rather the result of a system and internal processes and policies that were inadequate to ensure that TPG's representations to consumers that are the subject of this proceeding were always fulfilled. Further, TPG did not have in place adequate arrangements to monitor the effectiveness of the MAS System, which may have resulted in the relevant issues being identified and resolved by TPG earlier than they otherwise were. 37 TPG has made appropriate admissions and has co-operated with the ACCC during its investigation and agreed the SOAF at an early stage in the litigation. 38 The ACCC notified TPG of its investigation into the contravening conduct the subject of this proceeding in April 2020. Since that time, TPG has co-operated and meaningfully engaged with the ACCC in relation to the ACCC's investigation and subsequent litigation. 39 Since discovering the deficiencies in the design of TPG's automated system, TPG has taken steps to improve its MAS reporting processes and to address matters which it has identified as potential contributors to the breaches having occurred. 40 TPG implemented a remediation program prior to the commencement of this proceeding. The program covers customers who, during the period 20 December 2017 to 1 April 2021, had a line MAS lower than the advertised maximum speeds of their TPG plan. TPG has notified all customers who are eligible for the remediation program. As at 15 August 2022, TPG has provided refunds of over $2.5 million in total for 11,538 services where the customers elected to receive a refund. The remediation program remains open to all eligible customers. 41 TPG has been found to have contravened the ACL in connection with the supply of internet services, as detailed in the SOAF. 42 As indicated above, on 20 December 2017, the ACCC accepted an undertaking from TPG pursuant to s 87B of the Competition and Consumer Act (the Undertaking) to address concerns raised by the ACCC that customers were not receiving the speeds represented to them by TPG in its advertising in respect of FTTN and fibre-to-the-building NBN plans. TPG admitted that the conduct the subject of the Undertaking, which is similar in substance to the conduct with which this proceeding is concerned, was likely to have contravened ss 18 and 29(1)(g) of the ACL. It is apparent that the Undertaking was not sufficient to secure TPG's adherence to the requirements of the ACL. 43 TPG has expressed contrition for its conduct. Its contrition is borne out by its conduct in remediating customers and in resolving these proceedings at a very early stage. TPG has acknowledged the seriousness of its admitted breaches. It regrets that those breaches occurred and the harm caused to its customers. TPG has expressed its commitment to ensuring that it meets its regulatory obligations in future. 44 Having regard to the above matters, and the other matters referred to in the joint submissions, I am satisfied that the proposed penalty amount is appropriate to achieve deterrence, both specific and general.

Other orders 45 The parties also propose that the Court make orders to the effect that: (a) pursuant to s 246(2)(b) of the ACL, TPG establish and maintain a compliance program in accordance with the terms of Annexure A to the order; and (b) TPG pay $50,000 as a contribution to the ACCC's costs of and incidental to the proceeding. 46 I am satisfied that it is appropriate in the circumstances to make these additional orders.

Conclusion 47 It was for the above reasons that I made the declarations and orders on 11 November 2022. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.

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