The ACCC has commenced legal proceedings against a number of companies that it alleges have misled small businesses into entering contracts for telecommunication services and rental agreements with finance companies for equipment offered to them as “free”. The ACCC has also alleged that these bundled service agreements are unlawful.

Many small businesses say they have been misled, and have found themselves without a telephone service, but locked into expensive equipment leases where the telecommunications service provider goes out of business. Some of these small businesses are being pursued by finance companies for debts under the equipment rental contracts.

In order to assist businesses understand the risks and decide whether a bundle deal is appropriate for them, the ACCC has published a list of questions on its website that all businesses should ask themselves prior to signing a contract. Businesses should be alert to these questions every time they enter into a contract and where warning signs arise, take more time to look over each of the pages you are being asked to sign.

Published: 9 Dec, 2010

Before you sign....

In an increasingly competitive marketplace, it’s natural that small businesses will be looking for the best possible deal when purchasing office equipment or services. But finding a good deal can be a challenge for a busy small business person who doesn’t have the time for detailed comparison or consideration of offers.

Look out for the following warning signs:

	persistent sales people who will call or visit you several times claiming they will save you large amounts of money
	a reluctance to give specific details of the company or who is supplying the range of goods and services being offered
	oral promises not put in writing
	a requirement that payment be made up front before any services/equipment are provided
	inconsistencies between what you are told and what is in the contract
	the deal involves separate contracts with different companies

Don’t be rushed into signing a contract – if you encounter any of these signs, you should consider the offer very carefully and take more time to look over the each of the pages you are being asked to sign.

Bundled products and services

An increasingly popular method of selling goods and services to small businesses is to offer a number of goods and services in a ‘bundle’. Bundles often include incentives, such as goods that are said to be ‘free of charge,’ bonus products, or delayed payment plans.

Unfortunately, as is so often the case, many small businesses are finding out that when something looks too good to be true, it is.

The ACCC recommends that any small business looking to enter a contract for bundled goods and/or services asks the following questions prior to signing anything:

	Who are the companies or businesses involved in the different parts of the deal?
	Are commissions paid as part of the deal, and to whom?
	How many contracts does the deal involve? Is it just one contract with one company or are there contracts with other companies (and if so, for what)?
	Where in the contact does it confirm that the goods offered for ‘free’ actually are ‘free’?
	Exactly what is being offered and how much does it cost? If ’credits’ are being offered to offset related payments, how much are the credits and are there any limitations on when they are paid?
	Is there a lease or rental contract for the goods provided in the deal? If so, what are the monthly payments, and what are the terms of the lease or rental contract?
	Can you arrange your own finance? If you are not allowed to do that, then you should be suspicious. Remember, the company offering the deal has no incentive to get you the best finance deal it can.
	What happens if the service contract ends or the company providing the service ceases to operate? Are you still bound by the other contract?
	What is the total cost of the deal over the term of all the contracts?
	What penalties or costs are imposed if you wish to terminate one or more of the contracts early?
	Does the bundle actually work out to be cheaper than your existing arrangements?

Already signed but not getting what you paid for?

The ACCC has commenced legal proceedings against a number of telecommunications companies that it alleges have misled small businesses into entering into contracts for telecommunications services and rental agreements with finance companies for equipment offered to them as “free”. The ACCC also alleges that these particular bundled services agreements are unlawful.

Under this ‘bundled services deal’ business model, a telecommunications company enters into a contract with a small business to provide telecommunications services. The company says it will use call credits to cover payments for what some customers think is ‘free’ equipment. It may not be immediately obvious to the small business that it has actually entered into two separate contracts – one for the phone calls with a telecommunications service provider, and the other being a lease of equipment from a finance company.

While the dual contract arrangement might meet the needs of many businesses, and be a legitimate packaged deal, the ACCC is concerned by the number of complaints it has received about these products from small businesses.

Many small firms say they have been misled, and have found themselves without a telephone service, but locked into expensive equipment leases if the telecommunications service provider goes out of business. Some of these small businesses are being pursued by finance companies for debts under the rental contracts.

You may wish to report your situation to the ACCC infocentre on 1300 302 502, or the ACCC Small business helpline on 1300 302 021.

You may also wish to seek your own legal advice about your specific circumstances. Your lawyer may be able to provide advice about whether section 73 of the TPA can assist you in seeking a remedy. Section 73 provides a private right of action – it can only be used by parties to a contract – that may assist small businesses that have defaulted on ‘loan repayments’ and are being pursued by finance. Ultimately, only your lawyer can advise whether this may be applicable to your specific circumstances.