5 November 2004

Consumer Contracts Draft Industry Code

This is a submission in response to the Australian Communications Industry Forum's ("ACIF") invitation for public comments on the draft Industry Code DR ACIF C620:2004 Consumer Contracts.



This submission addresses a number of issues of significant concern to EFA. However, as we were not aware of ACIF's call for public comments until a week ago, there may be other aspects that are inappropriate from a consumer point of view that we have not identified during the time available. Lack of comment on any such aspects should not be assumed to signify agreement or even lack of concern.

If ACIF maintains a mailing list of consumer groups to whom invitations for public comment on draft Codes concerning consumer rights are sent, we request that ACIF add EFA's Executive Director's email address, [...], to that list.

Scope (2.1.1)

EFA is pleased to observe the inclusion of the note to 2.1.1. highlighting the fact that "carriage service providers include internet service providers". As ACIF will be aware from prior communications from EFA, EFA is concerned that some ISPs are not aware that they are carriage service providers required to comply with the Telecommunications Act 1997 and related registered Codes. This lack of awareness also became evident to the Australian Communications Authority during their recent investigation into illegal disclosure of silent and blocked calling numbers.

Under no circumstances should the note be removed - it is essential that the Code make clear in plain English, to both ISPs and their customers, that the Code applies to contracts with ISPs.

Suspected fraud or other illegal conduct (6.2.1(b))

Sub-clauses (iii) and (iv) of 6.2.1(b) are overly broad:

"(iii) suspension of the service if there are reasonable grounds for suspecting fraud or other illegal conduct by the Consumer or any other person using the service;
(iv) termination of the Contract where there is evidence of fraud or other illegal conduct by the Consumer or any other person using the service;"

The above should refer to suspected fraud or other illegal conduct that occurs during use of the service, that is, is directly associated with use of the specific service. As written, it appears to give a Supplier rights to suspend/terminate a service when they have, for example, merely read in a newspaper that a customer is alleged to have engaged in illegal conduct that has nothing whatsoever to do with the service supplied by the Supplier.

Also, the note box under 6.2.1(b) apparently contains an error. We assume the reference to "Subclause (iii)" therein should instead refer to "Subclause (v)".

Changes to contracts - test for detriment (6.2.1(j))

We understand that the intent of 6.2.1(j) is not to stop suppliers making changes to fixed-term contracts, but to give consumers a right to exit the contract when unilateral changes are made. The clause gives the consumer this right to exit without incurring any additional exit fees.

Version One of this clause requires there to be ‘detriment’ to the consumer in order for the consumer to have the right to exit the fixed-term contract. Version Two requires ‘material detriment’.

In our view Version One (with the changes suggested in the next section) is preferable. We do not support Version Two because it still allows price increases for fixed-term Internet and mobile contracts. The standard established under the Victorian Fair Trading Act (the ‘detriment test’) should be used for both 6.2.1(j) (price increases) and 6.2.1(k) (changes to other aspects of the service).

In addition, EFA is concerned that if Version Two is used, misunderstandings and/or confusion will result due to jurisdictional issues. To the best of our knowledge, the provisions of an Industry Code cannot over-ride State law. If Version Two is used, which we oppose, we believe the Code should include a specific note drawing attention to the fact that the test is different in Victoria to ensure that the Code will not inadvertently mislead suppliers of goods and services to consumers in Victoria, and those consumers, about those consumers' rights in this regard.

Refunds for installation costs associated with broadband services (clause 6.2.1(j)(ii))

Although the consumer has the right to exit the contract in the circumstances described above, the consumer is still required to pay any outstanding amounts on mobile handsets, as well as unpaid amounts covering equipment and installation costs (e.g. a modem and cost of installation for broadband).

We agree that is fair to require a consumer to pay any outstanding amounts on a mobile handset where the handset can be used with another supplier. We also agree with the concept that where the consumer is able to use the modem with another supplier, the outstanding amounts on installation and equipment should be met by the consumer. However, in some circumstances there will still be costs that the consumer must meet as a result of the unilateral variation by the supplier - for example, where the consumer has outlaid the costs of installation, then the supplier changes an important part of the contract and the consumer wishes to exercise their right to exit the contract. Under the draft clause, the consumer will still be out of pocket for the installation costs (because these are not ‘outstanding costs’ - they have been fully paid).

We hold the view that in this situation a refund should be provided to the consumer.

Time periods for exercising rights to exit contract (6.2.1(j) & (k))

We submit that the advance notice period of 21 days should be increased to 30 days, at the least in relation to broadband services. Some, probably most, suppliers of ADSL Internet access services advise customers to allow a minimum of 21 days from the placing of an order for the provisioning of the new service. Further, if a customer changing to a new provider is using the "churn" option provided by some ADSL suppliers, they cannot terminate their existing service prior to the completion of provisioning of the new service.

A period of 21 days advance notice does not in our view give consumers adequate time to find a new ADSL provider and have the new service provisioned before any detrimental variations to their existing contract take effect. For this reason we believe customers should be given at least 30 days advance notice.

Excessive rights to customer personal information and intellectual property (e.g. 6.2.1(o))

We note that Clause 6.2.1(o) prevents suppliers from obtaining excessive rights to customers' intellectual property by way of contract. We support this clause.

However, we are concerned that the Code fails to deal with the similar issue of the potential for suppliers to obtain excessive rights to obtain and use customers' personal information by way of contract.

In this regard it must be remembered that many small business carriage service providers (e.g. small ISPs and resellers of carriers' or ISP's services) are not required to comply with the Privacy Act 1988 and the ACIF Code dealing with customer Personal Information was, in our view inappropriately, de-registered in 2001. Furthermore, Part 13 of the Telecommunications Act 1997 does not adequately protect customer privacy and does not prevent suppliers' from obtaining excessive rights to obtain and use customers' personal information by way of contract conditions.

In our view a sub-clause concerning customers' personal information, similar to 6.2.1(o), must be added into the Code.

Acceptable Use Policies used with Internet and mobile services (6.2.2(d))

Acceptable Use Policies have been misused by suppliers in the past in order to impose new and unknown terms and conditions on consumers. We support the proposal to bring AUPs into the contract and to have them subject to the Code test for unfair terms. However in our view the Code does not go far enough in bringing AUPs to the attention of the consumer. The clause states that AUPs will not be unfair if they have been ‘made available to the consumer’.

Limitations on the use of broadband services (for example download limits) are core terms for a consumer and should be provided to them prior to entering the contract. Making these policies available to the consumer via a website, for example, is not enough - they should be provided personally to each customer who is bound by them.

Furthermore, whether or not an AUP has been 'made available to the consumer' is not the only aspect of AUPs relevant to fairness. An AUP could for example give a carriage service provider who provides a web hosting service the right to suspend that service, that is, prevent the entire web site from being accessible, on receipt of an allegation that a page on the site contains material that infringes copyright. Such a provision would in our view be unfair because it is not necessary for the provider to suspend the entire service.

Our support for the Code would be conditional on vast improvement to the way Acceptable Use Policies are treated within it. We consider the Code needs to specifically state that matters such as the 'detriment test', advance notice of variations and exit rights apply to all aspects of any AUP that forms part of a contract or is referred to therein.

We also consider the matter of AUPs would be better dealt with in section 6.2.1 since that section deals with unfair terms whereas 6.2.2 provides a list of exemptions.

Interception to comply with a "request" of a law enforcement agency (6.2.2(h))

Clause 6.2.2(h) states:

6.2.2 A term of a Contract is not unfair within the meaning of section 6.1 to the extent the object or effect of the term is to: ...

(h) permit the Supplier to suspend or intercept a service in order to comply with a request or direction of a law enforcement agency or a warrant or other court order;

EFA is adamantly opposed to the inclusion of reference to intercepting a service in the above manner. Laws apply to the circumstances in which a carriage service provider is or is not allowed to intercept a telecommunications service and an Industry Code should not purport or imply that a carriage service provider has the right to do so merely because a law enforcement agency has requested or directed the provider to do so.

Any contract that gives the supplier rights to intercept, by way of contract, merely because an LEA has requested them to do so is plainly an unfair contract because it seeks to over-ride the legislated privacy rights of customers.

Sub-clause (h) must be amended. It should state, for example:

(h) permit the Supplier to suspend or intercept a service in order to comply with a warrant or other court order, or as otherwise required or authorised by law;

6.2.2(o) and (p)

These sub-clauses include:

EXAMPLE: “International call rates subject to variation. Please contact us to confirm any prices before calling or see our website at”

We recommend that words or phrases containing the string "xxx" not be used in documents that are or will be made available online, due to the use of filtering and blocking technologies in some homes and business offices. We recommend the above be changed to "". (This domain name is commonly used in examples because it was saved from registration/use by businesses or other persons by IANA for use in examples in documentation. Note however that "" should not be used in examples because it is registered by an Australian business.)

Changes to content services on mobiles and broadband (6.2.2(t))

Content services are becoming an important feature of mobile services and broadband services. We note that within the Contracts Code content services are exempt from the general rule about price increases to fixed-term contracts (i.e. if the supplier puts up the price, then the consumer has the right to exit) provided that:

  • the content services are provided by a third party, not by the supplier itself
  • the price is clearly stated at the outset along with a statement alerting the customer that it may change
  • the supplier notifies customers who have used the content service that the price is about to increase, and
  • if the consumer chooses not the use the content service at the new price, no ‘penalty’ fees will apply.

In our view there is no real reason to make a distinction between content services and other (voice) services: if the consumer enters a fixed-term contract and the supplier increases the price, the consumer should be entitled to exit the contract. If this is not agreed to, we would see all of the conditions established under the current 6.2.2(t) as essential.

In relation to changes to the content itself (rather than price of content) we find the Code confusing in that 6.2.1(k), 6.2.2(v) and 6.2.2(z) would all seem to apply. We do not support either 6.2.2(v) or 6.2.2(z). In our view, the content that is provided could be an important reason for the consumer to choose a particular supplier. Therefore, if suppliers later withdraw that content or make significant changes to it and the service no longer provides the feature that attracted the consumer in the first place, the consumer should be entitled to exit the contract. We think that the test of ‘detriment’ would be sufficient in this case since it would prevent frivolous claims but would provide consumers with a remedy where there is genuine loss.

Right to supply "equivalent" goods or services (6.2.2(v))

We note the draft Code seeks comment on whether 6.2.2(v) should be included. EFA is opposed to this exception clause for the reasons stated above under (6.2.2(t)). It should not be included.

Variations re free phone, local rate or any other numbering services (6.2.2(x))

(x) permit the Supplier to vary a term in a Contract in respect of operator, free phone, local rate or any other numbering services defined in the Telecommunication Numbering Plan 1997, by giving reasonable notice explaining the variation and its effect on the Consumer;

EFA is opposed to this exception clause. There are many variations that could be made to contracts in relation to these types of phone numbers that would be highly detrimental to consumers.

For example, for many consumers the cost of Internet access is inherently tied to the cost of telephone calls, although the telephone service and the Internet access service are provided by different and unrelated suppliers. A consumer may enter into a contract with an ISP knowing they can use a particular phone number (e.g. 1300, 1800, 0198 number) to dial into the ISP's system at low call cost. If their telephone service provider subsequently increases the price of calls to that type of number, the effect may be that the cost of accessing the Internet access service is higher than the consumer can afford, or wishes, to pay. However, if the consumer is on a fixed term contract with the ISP, they would have no right to exit that contract as a result of the call price variation because it has nothing to do with the ISP.

Consumers therefore should have the right to exit the contract with their telephone call service provider on the same basis as applies generally in the Code (as they may be able to find another who does not charge such high prices for calls to the number used by their ISP). Hence, the Code should not include an exception for variations related to any types of numbers.

A situation similar to the above arose in 2002. Telstra commenced charging different rates for dialling 0198 numbers depending on whether their telephone service customer was dialling into Telstra's Bigpond ISP or another ISP, that is, charging higher rates for dialling into another ISP. Further information is available in the article Win for Users: Telstra backs down over ISDN price rise
by Dan Warne, Whirlpool News, 4 Sep 2002:

"If Telstra had been successful, customers of its largest dial-up POP competitor, COMindico would have been paying nearly 300% higher call rates than customers of Bigpond."

Further, in our view it is not clear whether sub-clause (x) would apply to a variation in an ISP's contract concerning the numbers available for dialling in to their Internet access service. If the exception would apply to that, such a variation may also be highly detrimental to a consumer. For example changing a local dial in number from e.g. 4611 prefix to 9611 prefix would be significant for some consumers because it moves the number from a local call to a time charged STD call.

Variations when service provided by a third party (6.2.2.(y))

EFA is opposed to this exception clause because it will enable many suppliers to avoid the normal provisions relating to fair terms. We see no reason why third party suppliers cannot inform their re-sellers of changes in sufficient time for the re-sellers to inform their customers in advance etc in accord with Clause 6.2.1(j) Version One and/or 6.2.1(k) as applicable.

This clause, 6.2.2.(y), would for example enable Telstra to make changes to conditions of use or pricing of its MegaPOP Internet access service, that are of detriment to the customers of those ISPs who provide Internet access by way of the MegaPOP service, and enable those ISPs to avoid compliance with 6.2.1(j) and/or 6.2.1(k). Customers of such ISPs should have the same rights to advance notice and contract exit rights as the customers of ISPs who do not use a third party in the provision of services to their customers.

Furthermore many Internet users are not even aware that their ISP in fact uses Telstra's MegaPOP service and therefore, unless that information is disclosed in the contract, the customer would not even realise that proposed clause 6.2.2.(y) is relevant to their contract.

In our view exception 6.2.2.(y) should be deleted. The 'detriment' test should apply to such variations.

Further if 6.2.2.(y) is not deleted, at the very least sub-clause (ii) should be amended by adding, at the end, the words "(where such equipment can be used in connection with services provided by other suppliers)".

Right to change features, functionality or characteristics of goods and services (6.2.2.(z))

EFA is opposed to this exception clause for the reasons stated above under (6.2.2(t)). The ‘detriment’ test should apply to such changes.

About EFA

Electronic Frontiers Australia Inc. ("EFA") is a non-profit national organisation representing Internet users concerned with on-line rights and freedoms. EFA was established in January 1994 and incorporated under the Associations Incorporation Act (S.A.) in May 1994.

EFA is independent of government and commerce, and is funded by membership subscriptions and donations from individuals and organisations with an altruistic interest in promoting online civil liberties. EFA members and supporters come from all parts of Australia and from diverse backgrounds.

Our major objectives are to protect and promote the civil liberties of users of computer based communications systems (such as the Internet) and of those affected by their use and to educate the community at large about the social, political and civil liberties issues involved in the use of computer based communications systems.

EFA policy formulation, decision making and oversight of organisational activities are the responsibility of the EFA Board of Management. The ten elected Board Members act in a voluntary capacity; they are not remunerated for time spent on EFA activities. The role of Executive Director was established in 1999 and reports to the Board.