UK based audio branding company Please Hold (UK) Limited (PHMG) has committed to amend its contract terms after an ACCC investigation into allegations that PHMG’s standard form contract contained unfair contract terms, and limited consumer guarantee rights.
PHMG provides audio branding services including on-hold music and on-hold marketing services to small business customers.
The ACCC was concerned that PHMG’s contracts, which usually had 24 to 36 month terms, rolled over for another full contract term if the customer did not provide written cancellation at least 42 days before the end of the initial contract. Customers who did not cancel in time had their contracts extended without further notice and faced early termination charges equivalent to the payments for the full contract term, less three per cent.
“The ACCC considered these contract terms were unfair, as the combination of PHMG’s termination clause and the automatic roll-over of the contract had the potential to cause significant financial detriment by requiring customers to, in effect, pay for a service they may no longer have needed, under a contract they thought had expired or had tried to cancel,” ACCC Deputy Chair Mick Keogh said.
“We welcome PHMG’s decision to amend its contracts to address the ACCC’s concerns, including the introduction of a rolling month-by-month contract term after the end of the initial contract period, allowing cancellation at any time with 30 days notice.”
In addition, PHMG has clarified their customers’ consumer guarantee rights under the Australian Consumer Law (ACL) in its contracts. The ACCC considered PHMG’s previous contract clauses may have contained false or misleading representations about consumers’ rights and the consumer guarantees under the ACL.
“Businesses, including overseas entities conducting business in Australia, are reminded of the importance of carefully reviewing their standard form contracts with consumers and small businesses, to ensure they do not contain unfair contract terms,” Mr Keogh said.
PHMG will notify Australian customers whose contracts include one or more of the clauses of concern of the amendments.
PHMG did not accept that its contract terms were unfair or constituted a breach of the ACL, but co-operated with the ACCC’s investigation and agreed to amend its contract terms to address the ACCC’s concerns.
Note
Under the Australian Consumer Law, businesses are not prohibited from including or relying on an unfair contract term against consumers or small businesses.
Although a Court can declare a contractual term to be unfair and therefore void and unenforceable, currently penalties cannot be imposed on companies using unfair contract terms.
The ACCC continues to advocate for a change to the Australian Consumer Law to make it illegal for businesses to include or rely on an unfair contract term against consumers, and for the Courts to have the power to impose penalties where businesses use and benefit from unfair contract terms.
Background
PHMG is a provider of audio branding services, including on-hold music and on-hold marketing services. It is headquartered in the UK and has offices in the US, Canada, Singapore and since March 2019, Australia. PHMG is a subsidiary of PHMG Holdings Ltd.
