Tuesday, November 02, 2010

How does an industry do this to itself?

I found the juxtaposition of two items today of interest.

The first was reporting of the decision in the latest ACCC v Optus case. The court has thankfully found that advertising a plan as 150GB where there are circumstances where you don't get 150GB is misleading.

What is disappointing is that Optus tried to run a defence that really the ad didn't matter because the matters were fully explained to the customer in the sign-up process. Thankfully the judge, noting

Lurking beneath this evidence is the proposition, not expressly articulated in argument, that consumers do not rely upon advertisements and cannot, in those circumstances, be misled by them. That proposition sits uncomfortably with the size of the advertising campaigns in question which is clearly substantial and inconsistent with an exercise conducted sheerly for the merriment of its designers.

I have, however, previously written of more recent Optus conduct that I think is equally misleading but thus far not prosecuted.

This conduct reflects the kind of thinking that was witheringly critiqued by David Howarth from CHOICE at the ACMA Sydney hearing on last Wednesday. He has undertaken to provide that material as a supplementary submission.

But how is it that the combined intellectual powers of lawyers and marketers combine to convince themselves that such an add is not misleading? Forget the legal definition - it must be misleading as an ad if you think you need to explain it in detail in the sales process. Let alone the underlying behavioural characteristic that - no matter how long the sale process - consumers once convinced they want to purchase something self-select out contrary information.

A more telling example was given in the Four Corners report on bundling in telco sales to small business. This model revolved around bundling a lease for "office" equipment in a telecommunications service contract, the lease payments for which are supposedly paid for out of "rebates" from the telco service model. Where this deviates from the mobile phone handset proposition is that there are seperate contracts and the term is even longer.

Ignoring the matters in these cases that otherwise involved straight fraudulent addition of items to the leases, at the core the issue is the misrepresentation that the goods are "free". At the point later in the sign up process where the fact there is a second contract with a repayment is made clear the salesperson used soothing.

The conduct is exactly the same. In some ways it is worse because the telco industry doesn't have rules about income assessment but the finance industry does - and there are separate finance contracts.

I was somewhat surprised to see ACCCC Chair Graeme Samuel being focussed on the conduct of the dodgy telcos, when the conduct of the finance firms is more reprehensible - they are the ones dealing with a dodgy "agent". If a telco sells through dodgy door-to-door sales the ACCC goes the telco, but if a finance company sells through a dodgy telco it looks like the telco is still the target.

Do I live in a parallel universe where I expect people to behave ethically? Don't these people get it that business is built on trust?

Novae Meridianae Demetae Dexter delenda est

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