ACCC ensures Commoditel corrects misleading call rate pricing

Australian provider of pre-paid mobile telecommunication services, Commoditel has corrected call rates misrepresentation following intervention by the Australian Competition and Consumer Commission.

Between January 2005 and December 2007 Commoditel (Australia) Pty Ltd which trades as Revolution Telecom represented on its website that it charged customers 9.9 cents per 30 seconds for mobile calls made to mobile phones and landlines within Australia.

However, Commoditel in fact rounded the total cost of each call made to the nearest cent which meant that in relation to most calls made the company did not charge exactly 9.9 cents per 30 seconds. This meant, for example, that the total cost of calls lasting two and a half minutes or less were rounded up to the nearest cent and the total cost of calls lasting between three minutes and four and a half minutes were rounded down to the nearest cent, ACCC Chairman, Graeme Samuel.

"Telecommunication service providers need to ensure if they represent that they charge a particular call rate that they do charge that rate," he said. "A headline claim should be accurate and not subject to contrary application.”

The ACCC was therefore concerned that the representation was misleading in contravention of sections 52 and 53(e) of the Trade Practices Act 1974. After the ACCC raised its concern with Commoditel, the company ceased making the representation. The company instead commenced representing that it charged 10 cents per 30 seconds and charging customers that rate for all calls made.

According to Commoditel, the average call duration of its customers was two minutes. Consequently, in respect of calls made using Commoditel's service under its previous call rate, more of those calls would apparently have had their total cost rounded up rather than rounded down to the nearest cent. Commoditel estimated that the rounding of call charges resulted in a net gain to the company of approximately $17,500.

Commoditel advised that the rounding of call charges was due to inadvertence on the company's part in not reviewing its website to reflect its billing software limitations.

In response to the ACCC's concerns Commoditel also notified its existing customers of the change to its call rate and that under its previous call rate calls on occasion may have been charged at 10 cents per 30 seconds rather than 9.9 cents per 30 seconds; credited its existing customers' credit balances by $1 to compensate them for any possible amount each of them may have been overcharged by its rounding policy; and to ensure that it did not gain from its conduct, donated $21,674 to The Cancer Council Australia being the estimated amount it overcharged its previous customers plus an additional sum to account for the tax deduction benefit it received from making that donation.

"Where service providers advertise call rates which do not correspond exactly to their call charges such conduct may not only mislead consumers but may also give those businesses an unfair commercial advantage over their competitors. Price is a very important element of competition and as such great care should be exercised in such representations," said Samuels.