A Federal Court judge on Wednesday ordered Optus to pay a A$100 million fine for its “appalling” high-pressure sales tactics over several years up to 2023. More than 400 people were pressured or misled into buying phones or contracts they didn’t want, couldn’t afford – or in some cases couldn’t even use.

The court’s decision approves an agreement reached between Optus and the Australian Competition and Consumer Commission (ACCC) in June, under which Optus admitted it had engaged in “unconscionable conduct” and accepted the penalty, as well as various remediation measures.

Optus chief executive Stephen Rue (who only joined the company in November last year) was asked about the fine earlier in the day, while giving an update on last week’s Triple Zero outage.

Rue said the sales had been “totally and utterly unacceptable” and that the company had since overhauled its sales processes, incentives and bought back some of the franchises at stores where they had taken place.

But as Financial Counselling Australia’s director of First Nations policy Lynda Edwards told ABC News, a $100 million fine was “not a lot of money” to a large company like Optus:

What is it going to take for these companies to actually look after vulnerable people in our communities? You know, our telcos in Australia, they’re given free reign on how they self regulate their business.

So, will this fine really teach Optus a lesson? Given the parallels with a similar scandal at Telstra in the not-so-distant past, what is it going to take to actually stop this happening again?

What Optus did wrong

Between August 2019 and July 2023, staff across 16 Optus stores were found to have engaged in “inappropriate sales conduct” with more than 400 people.

As summarised by the court, Optus engaged in conduct that included:

undue pressure and influence, a failure to explain the terms and conditions of contracts, a failure to conduct coverage checks, a failure to conduct credit checks, mis-selling and overselling of accessories, identity verification failures, and inappropriate conduct in relation to debt collection.

Many of the customers were in a position of vulnerability, including people who were homeless, unemployed, who didn’t speak English as their first language or were living with a mental disability.

A number of those targeted for the high-pressure sales tactics were First Nations people from regional, remote and very remote parts of Australia.

The size of the penalty

$100 million seems like a sizeable figure. But what was the maximum penalty Optus could have been given?

While the amounts vary according to the year the conduct took place, for conduct occurring after 2022, the maximum possible penalty is in the order of $50 million per contravention.

In that light, Optus’ decision to accept the $100 million penalty looks cost effective, and also saves litigation costs. And it’s still less than its underlying net profit for the 12 months to March 31 this year, which was reportedly $136 million.

Bigger penalties just aren’t cutting it

Optus’ systemic conduct in this case was palpably and patently wrong. Yet it was not the first time one of Australia’s biggest telecommunications companies had engaged in predatory sales practices that targeted First Nations and regional communities.

In 2021, the Federal Court ordered Telstra to pay $50 million in penalties for unconscionable conduct.

The conduct in question involved the “mis-selling” (where a customer is misled in a sale) of mobile phone contracts to more than 100 Indigenous consumers across three states and territories, which they did not understand and could not afford.

You might think the risk of penalties resulting from poor sales practices could have easily been foreseen by any other telecommunications company, including Optus. Yet here we are again.

So, we need to be asking – is the current approach of deterrence via civil penalties working?

Holding directors to account

One possible response to this kind of egregious conduct by companies would be to impose financial penalties and stronger incentives for oversight on directors.

For example, in response to the recent record penalty imposed on ANZ for unconscionable conduct and other misconduct, corporate law expert Helen Bird suggested the bank’s senior executives should have their bonuses “cancelled or clawed back”.

Certainly, in this case, the court was scathing of the lack of a timely response by Optus senior management, saying they “abrogated any semblance of responsible corporate behaviour”.

But we may still want more by way of supervision.

Demanding proof of real change

As part of the consent agreement, Optus has undertaken to implement a review of its sales and complaint handling processes.

But at this point, promising “we will do better” may not be enough. Regulators – and the public – should be demanding proof that systems and processes for preventing predatory practices are working.

It may be time for a robust safety overhaul of the entire telco sector – and not just for Triple Zero calls.

There are many regimes that monitor safety, including food safety, aircraft safety and in the financial sector. At a minimum, a safety model applied to telcos would have to incorporate:

  • a risk assessment
  • agreed responses
  • designated safety officers
  • training for all staff.

But most importantly, repeat offenders should have to show that all of these measures are actually working. This means more than just “sincere apologies for failing customers” – we need hard data and real time supervision.

This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Jeannie Marie Paterson, The University of Melbourne

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Jeannie Marie Paterson has previously received funding from the Australian Research Council to investigate misleading conduct, enforcement and regulatory design.