The Australian Competition and Consumer Commission said it had investigated the matter under powers delegated to it by the Australian and Securities Commission.
An ACCC statement said Vodafone had confessed it was likely to have breached the ASIC Act from at least 2015.
Vodafone had provided the ACCC with a court-enforceable undertaking about the billing service which sold ringtones, games and other content from third parties.
ACCC chair Rod Sims said: “Through this service, thousands of Vodafone customers ended up being charged for content that they did not want or need, and were completely unaware that they had purchased.
"Other companies should note, money made by misleading consumers will need to be repaid."
The statement said Vodafone had agreed to contact customers whom it judged to have been affected and offer them refunds.
While the telco began to phase out subscriptions to such billing services by mid-2015, one-off purchases took place until March 2018.
Vodafone is the third telecommunications service provider to be fined for these activities. Both Optus and Telstra were fined $10 million apiece, the former in February and the latter in April 2018, over similar offences.