The Australian Competition and Consumer Commission announced last night that Dodo, a frequent target of false advertising complaints, had misled customers who signed up to its "free offer plans" between October last year and March this year. But ACCC chairman Graeme Samuel said today his efforts to clamp down on rogue telcos were being hampered because he did not have the power to fine them.

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"In the absence of penalties for misleading and deceptive conduct, what essentially it says to businesses is you can engage in conduct that is essentially dishonest and affects consumers but you don't face any financial consequences from doing so," he told smh.com.au. Dodo had promised customers who signed up to mobile and broadband plans either a "free" Asus Eee PC, fuel card or cash payment, but the regulator found the extras were far from free.

In fact, Dodo was offering comparable plans without the "free" goods for $30 a month less. Dodo has now promised to refund customers who signed up to the free offer plans and lower their monthly fees.

Samuel said he was unable to impose a fine on Dodo over the misleading "free offer plans" and was fortunate to even secure refunds, due to a "quite significant deficiency" in the Trade Practices Act. Dodo regularly appears towards the top of the ombudsman's complaints list and last year the Australian Communications and Media Authority fined it $147,000 for calling numbers listed on the "Do not call" register without consent. The authority had already warned Dodo to clean up its act on complaints handling and billing.

In 2007, Dodo was heavily criticised for offering "free" ADSL2+ broadband plans. The fine print, however, said the free offer only included 150MB of usage, which could be used up within a minute, after which heavy excess usage penalties applied.

The refunds were agreed to voluntarily by Dodo and Samuel said they would have been "very difficult" to secure if the ACCC was forced to take action against Dodo in the Federal Court. "We can stop them by injunctions but what we can't do is obtain financial penalties, so therefore the consequences of engaging in misleading conduct in Part 5 [of the Trade Practices Act] ... is pretty light-handed," he said. A spokesman for the Competition Policy and Consumer Affairs Minister, Chris Bowen, said changes to the Trade Practices Act, to be introduced to Parliament in June, would "enhance powers for the ACCC" including allowing it to impose financial penalties and seek refunds on behalf of consumers.

Dodo's managing director, Larry Kestelman, said in a statement this afternoon: "Although we had no intention to mislead any consumers, we will work harder to make sure that our offers are clear and straight forward."

At a communications conference in March, Samuel said he was "putting the telecommunications industry on notice".

"The ACCC is drawing a line in the sand - we're saying to the poor performers - and there are many of them - mend your ways," he said. "Misleading advertising, unfair contracts, inadequate disclosure and subscription scams are all in the ACCC's sights. Standards must improve or risk increased scrutiny and action."