An ASX technology provider has made admissions that it "likely" engaged in misleading or deceptive conduct in signing up customers.
The Australian Competition and Consumer Commission announced Tuesday that tradespeople classifieds operator Hipages Group Holdings Ltd (ASX: HPG) confessed to "subscription traps".
The problems originated from the platform not adequately disclosing contract terms when signing up customers.
This effectively meant that tradies, who pay subscriptions as high as $999 each month, had their contracts automatically renewed without their knowledge.
Cancelling contracts also triggered an early termination fee that many customers were not expecting.
"Many subscribers were unaware that they had to specifically opt out of hipages' automatic 12-month renewal, and that there was only a very short cooling off period in which they could avoid paying an early termination fee," said ACCC deputy chair Mick Keogh.
"When some people attempted to cancel their auto-renewed contracts, they were told they would have to pay out the full 12-month term."
Hipages also admitted that it likely breached Australian Consumer Law when telling some customers that they needed to take extra steps to cancel their subscription, and that the platform could enforce payment for an extension of the contract.
"This was not the case because the subscribers had already given valid notice of cancellation before the automatic renewal date."
Image source: Getty Images
Online marketplaces notorious for trapping customers
At the time of writing, Hipages had not made an announcement on the ASX in response to these revelations.
According to the ACCC, the tech company agreed to a court-enforceable undertaking that these "subscription trap" mechanisms would be fully disclosed to customers.
Hipages also agreed to reform its complaints handling process.
"The rise of online marketplaces has brought greater convenience to many people, but it's also led to an increase in sneaky tactics such as subscriptions that are difficult to get out of," said Keogh.
"Businesses, including online platforms, must be clear and upfront with their customers about important contract terms such as renewals and cancellations. Failure to do so risks breaching the Australian Consumer Law and may result in enforcement action."
The consumer watchdog noted that Hipages had cooperated with its investigations.
Despite the confession, Hipages shares were up 0.7% in early trade on Tuesday morning.
