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The ACCC has launched proceedings against Telstra in the Federal Court, after the telco giant owned up to misleading conduct in relation to its Premium Direct Billing (PDB) service.
Telstra admitted to making false or misleading representations to its customers in relation to the third-party billing service during 2015 and 2016.
The court will hear that under the PDB service, Telstra customers were unwittingly signed up to further subscriptions and charges with third parties without being asked prior to enter payment details or verify their identity.
It is alleged that Telstra did not properly inform customers that it had set up PDB as a default system on customers' mobile accounts.
This meant that if customers accessed content through the service, even unintentionally, they would be billed directly by Telstra.
The PDB has been operational since 2013 and Telstra estimates that more than 100,000 customers may have been unconscionably affected or charged under the scheme.
ACCC chairman Rod Sims says Telstra's actions have left many consumers out of pocket.
"Telstra has admitted that it misled customers by charging them for digital content, such as games and ringtones, which they unknowingly purchased," says Sims.
"Many Telstra customers paid for content they did not want, did not use, and had difficulty unsubscribing from.
"Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases made without their knowledge or consent.
"Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers."
When customers began contacting the provider to complain, Sims says Telstra directed many complaints to third parties knowing that the customers would find it difficult to get a refund or cancel a subscription.
"Customers were often left frustrated and out of pocket as a result of Telstra's conduct," says Sims.
Telstra has confessed that its internal processes for dealing with PDB issues were inadequate.
It has since cancelled the service and paid out at least $5 million in refunds.
A further $10 million pecuniary penalty could be imposed following the proceedings.
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