Telstra (ASX:TLS) share price higher despite being hit with $50 million penalty

The Telstra Corporation Ltd (ASX:TLS) share price is edging higher today despite being dealt a $50 million penalty by the Federal Court…

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The Telstra Corporation Ltd (ASX: TLS) share price is edging higher today despite being dealt a $50 million penalty by the Federal Court.

At the time for writing, the telco giant’s shares are up slightly to $3.49.

What was the penalty?

This morning the Federal Court ordered Telstra to pay a $50 million penalty for its treatment of Indigenous customers in rural and remote parts of Australia.

This follows the telco giant previously admitting that it had acted unconscionably towards 108 customers across five Telstra-branded stores, by selling them phone plans that they could neither afford nor understand.

What did the Federal Court say?

The Honourable Justice Mortimer explained: “The orders made today, and as a result of contraventions of the Competition and Consumer Act 2010 (Cth), which Telstra has admitted, the Court has imposed significant penalties on Telstra, as well as granting declaratory relief and ordering Telstra to pay the costs.”

“The contraventions involve unconscionable conduct engaged in by sales staff at five Telstra licensed stores in connection with contracts for the supply of post-paid mobile products and services to 108 consumers. Those consumers are all Aboriginal and Torres Strait Islander people, who – for a variety of reasons – were vulnerable to unconscionable sales practices employed by the staff employed at the Telstra stores.”

Justice Mortimer notes that Telstra’s action led to serious financial hardship and distress, which was aggravated by its debt recovery practices.

She explained: “The affected consumers were also exposed to serious financial hardship and distress through becoming liable for expenses that they could not afford to pay, and which some had not understood they were incurring. Telstra’s approach to complaints about the sales practices, and its delay in accepting responsibility for the conduct, as well as some of its debt recovery practices, are aggravating factors.”

In light of the above and Telstra’s apology and cooperation, the Federal Court felt a $50 million penalty was appropriate.

Justice Mortimer concluded: “Taking into account all of the circumstances, including the enforceable undertaking, the corrective and remediation action, Telstra’s public apology and its high level of cooperation in these proceedings from the start, I am satisfied the penalty of $50 million is an appropriate penalty, and that the declaratory relief sought is also appropriate. I also take into account the enforceable undertaking, and the agreed proposal for Telstra to pay a contribution towards the legal costs of the ACCC.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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