Termination fees at forefront of ACCC inquiry - News - Communications

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This story was printed from ZDNet Australia.
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Termination fees at forefront of ACCC inquiry

By Rachel Lebihan, ZDNet Australia
February 22, 2002
URL: http://www.zdnet.com.au/news/communications/soa/Termination-fees-at-forefront-of-ACCC-inquiry/0,130061791,120263630,00.htm

The competition watchdog has said there is the potential for both a contractual and consumer protection issue surrounding early termination fees, following its inquiry into Telstra's recent mobile price hike which will see users slugged with AU$150 for cancelling contracts.

The national carrier announced its new mobile pricing plan last month, which ultimately benefits users who sign up to a 12-month contract. Unfortunately though, users who attempt to abscond the contract mid-term will incur an early termination fee of AU$150.

The Australian Competition and Consumer Commission (ACCC) launched an investigation -- still ongoing -- into what many deemed to be the incumbent carrier's latest anti-competitive money-spinner.

Whilst ACCC general manager, telecoms, Michael Cosgrave, told ZDNet Australia that early termination fees themselves weren't the problem, being a means for the telcos to cover the cost of entire contracts, he said it was a question of whether carriers were -more than simply recovering costs".

-I don't think there's an issue with early termination fees themselves...but the issue is the impact of such fees and the extent to which they might be operating as penalties," he said.

-There's the potential for both a contractual and consumer protection issue here," Cosgrave added.

The ACCC has not reached a decision as to whether Telstra is over-penalising its mobile customers for early termination of contracts and said whilst the issue is a hot topic of its investigation into Telstra, such fees are certainly not an issue that relates to the telco giant alone.

-We can't look at Telstra's fees without looking at the rest of the industry," Cosgrave said. -It has required us to think about the issue in a wider context."

The ACCC said it hoped to wrap up its investigation -relatively soon" being that the some of the provisions of Telstra's new mobile pricing plan are already in the marketplace, but could give no definitive date.