Vodafone fined $400k over misleading ads; faces five more charges
Vodafone has been fined $402,375 plus court costs for breaching the Fair Trading Act for misleading customers over the cost of mobile internet access.
The fine was imposed by the Auckland District Court this morning.
In the Auckland District Court on July 19, the company pleaded guilty to five charges under the Act, brought following a Commerce Commission investigation.
The commission had sought a fine in excess of $500,000.
A Vodafone spokesman told NBR his company was unlikely to appeal.
The charges stemmed from a 2007/2008 promotion. Some Vodafone customers did not realise they were being charged a high rate ($11 per megabyte) when they moved beyond the company's "walled garden" Live service to access the regular internet on their phones.
Vodafone Live or "V-Live" had been advertised using the phrases "completely free", "absolutely free" and "you won't be charged."
Although customers were not charged for accessing and browsing within the confines of the Vodafone Live service, the commission said, they were not adequately notified when they left Vodafone Live! and that thereafter they would be incurring charges for downloading and purchasing products or services.
In addition, the ‘Vodafone Live!’ heading was displayed as a banner across the top of the screen on many Vodafone mobile phones, even when the user had left Vodafone Live, the commission said.
As a result, customers who thought they were using a free service were instead being charged at the casual data rate of $11.25 per megabyte (MB). At the time, an average song download of 4MB (using the standard MP3 compressed format) would have cost approximately $45 to download.
The commission's Mr Wallace said the fact that customers assumed they were using the Vodafone Live! service when they weren’t, so didn’t know they were being charged, and the high cost for data, resulted in significant “bill shock” for some customers. One complainant to the commission was charged over $1,300.
Vodafone: "Technical problems"
This morning, Vodafone said in a statement that "We apologise for the technical problems which led to differential charging between V-live! and the rest of the mobile internet in 2007. We would never deliberately mislead our customers and we have refunded all the customers who were affected by this issue.
"We have taken these charges very seriously and have co-operated fully with the Commerce Commission throughout its investigation and during the trial."
Commerce Commission lawyer Nick Flanagan told the court that Vodafone had been put on notice by the commission, yet took no action over a 14-month period.
The commission's competition manager, Stuart Wallace said "Refunds were given reluctantly and on an inconsistent basis. One of the complainants to the commission was only refunded in July this year as a result of a reminder from the commission. In addition, some prepay customers may not have been aware that they had lost credit in this way."
Judge: "Not technical oversight"
In sentencing, Judge Roderick Joyce said “Vodafone’s shortcomings must, in my view, have had a very real impact on many consumers or customers. The money sums in question might have meant nothing to someone of considerable means but pay-as-you-go customers are surely not in that category ... in any event, no-one – rich or poor – should ever have to pay what, properly pre-warned, they could avoid paying.
"I was not persuaded that to describe the problem as being one of “technical oversight” was duly to recognise the level of mismanagement ... it is extraordinary that a concern like Vodafone fell down in such an elementary way.”
More grief could be on the way
This was the first of six cases - first highlighted by NBR in October 2009 - to reach court that involves the Commerce Commission and Vodafone. Each of those cases relates to alleged misleading broadband or mobile phone promotions by Vodafone between 2006 and 2009.
Vodafone is defending the remaining charges.
They centre around:
In addition to the Vodafone Live! issue, the charges relate to various representations made by Vodafone regarding:
- the extent of the coverage of Vodafone’s 3G mobile broadband service, made in Vodafone’s ‘broadband everywhere’ marketing campaign between October 2006 and April 2008;
- the availability of a $10 free airtime credit for those customers who registered their details on Vodafone’s website between May 2007 and September 2008;
- the cost of using Vodafone’s $1 per day casual data charge for Vodafone’s mobile internet service between July 2008 and November 2008;
- the size of Vodafone’s mobile phone network between September 2008 and February 2009; and
- the price of a Sony Ericsson W200i mobile phone between July and August 2007.