Soon-to-be-taken-over telco Vocus Group suffered the embarrassment yesterday of two of its main brands – Dodo and IPrimus – being fined a total of $2.5 million in the Federal Court after an investigation by the competition regulator, the ACCC.
Vocus Group is the country’s 4th biggest telco and is currently being taken over by private equity via a scheme of arrangement. The bidders are Macquarie Infrastructure and Real Assets and its managed funds, and Aware Super Pty Ltd as trustee of Aware Super (a major industry super fund).
In a statement on Wednesday, the ACCC said the Federal Court ordered the penalties are finding that the two companies made misleading claims about their NBN broadband speeds. Dodo and iPrimus are both part of the Vocus Group.
The Commission said that Dodo and iPrimus admitted that their ‘typical evening speed’ claims made between March 2018 and April 2019 were misleading because they were not based on an appropriate testing methodology.
“Accurate information about broadband speeds, particularly during the busy period when consumers are most likely to use their services, is essential for consumers to be able to compare broadband offers and pick the best service for their needs,” ACCC Chair Rod Sims said in the statement.
“The ACCC brought this case because we were concerned that the methodology which the Vocus Group used as the basis for its speed claims cherry-picked only the fastest speeds its network could deliver, and ignored the slower speeds many of its customers experienced.”
“These misleading speed claims meant consumers could not accurately compare different offerings and make an informed choice about their broadband provider,” Mr Sims said.
The Commission said that under the Australian Consumer Law, service providers must not make false or misleading representations about the performance characteristics of their services. Representations about future matters are misleading if they are not based on reasonable grounds.
“Despite clear ACCC guidance on making broadband speed claims, Vocus Group used a flawed methodology which was inconsistent with that guidance, and misled consumers about the speeds of its plans,” Mr Sims said.
When considering the appropriate penalties to be imposed, Justice Murphy said that through their parent company Vocus, Dodo and iPrimus “chose not to adopt the methodology proposed as industry best practice by the ACCC and instead developed and applied the Vocus Methodology, which as it eventuated had a number of deficiencies”. He added: “That is material to the penalties imposed.”
Dodo and iPrimus co-operated with the ACCC’s investigation, admitted liability and agreed to make joint submissions to the Court in relation to penalties and other orders, the ACCC said in its statement.
Vocus shares traded steady at $5.46.
A virtual scheme of arrangement meeting of shareholders will be held on June 22. With the board recommending the offer, the meeting will vote in favour of the takeover.
