Thursday, 19 May 2022 11:17

Commerce Commission appeals NZ$2.25 million fine against Vodafone


New Zealand government agency Commerce Commission has filed an appeal to impose a NZ$2.25 million fine on Vodafone New Zealand as it had incurred an offence under the Fair Trading Act when it advertised its FiberX.

The Commerce Commission had originally sought a fine of NZ$5.8 million and is appealing the NZ$2.25 million sentence.

The Commerce Commission points while the sentence imposed in the Auckland District Court on 14 April was the largest fine, it will argue it is manifestly inadequate.

The Commission will argue that the fine did not reflect the gravity of the offence and the size and financial resources of Vodafone, says Commerce Commission chair Anna Rawlings.

The Commission will also argue the company’s conduct was wilful (rather than grossly careless) and allowed Vodafone to make significant commercial gains.

“We will argue that the District Court did not apply adequate uplift to ensure that the fine sufficiently reflects the offending of a large corporate offender like Vodafone,” Rawlings says.

“The fines imposed for this type of offence must be significant enough to deter Vodafone and other large businesses from engaging in this type of conduct in the future,” Rawlings declares.

“The Commission sees benefits in clarifying the application to this case of the Court of Appeal’s decision in 2020 in Steel & Tube, which sets out a framework for sentencing decisions under the Fair Trading Act.”

The Commission will ask the High Court to reconsider the pieces of evidence from individual consumers that they were harmed and suffered as a result of Vodafone’s breaches.

Vodafone was found guilty, following a two-week trial, of conduct liable to mislead consumers into believing that FibreX was a fibre-to-the-home broadband service, when it was not.

It also pleaded guilty to charges relating to its online address checker, which suggested to consumers that FibreX was the only available broadband service at their address, when it was not true.

“The promotion of Vodafone FibreX denied consumers the ability to make an informed choice about FibreX or to choose the type of broadband most appropriate for their needs,” Rawlings says.

It also affected the competition of broadband services. By misleading consumers into believing FibreX was fibre-to-the-home, Vodafone gave itself an unfair advantage over its competitors who were selling true ‘fibre’, including local fibre companies and other retailers.

Vodafone’s conduct coincided with Government investment of more than NZ$1.5 billion in the roll-out of UFB (ultra-fast broadband).

This investment aims to stimulate consumer uptake of fibre-to-the-home broadband services.

Vodafone’s FibreX campaign were advertised to around 250,000 households in Wellington, Kapiti, and Christchurch.

Vodafone continued with the campaign even after being contacted by the Commission following consumer complaints.

Vodafone was sentenced in the Auckland District Court on 14 April 2022 for 18 representative charges under section 11 of the Fair Trading Act 1986 (FTA) relating to conduct in Wellington, Kapiti and Christchurch, where its FibreX branded service was offered between 26 October 2016 and 28 March 2018.

According to the Commerce Commission, the 18 charges comprise:
Nine charges relating to Vodafone’s representations on its website about the availability of fibre-to-the-home (FTTH) broadband services, to which Vodafone pleaded guilty on 16 November 2018;

And nine further charges arising from Vodafone’s branding and advertising of its Hybrid Fibre Cable (HFC) broadband service, of which Vodafone was found guilty in the Auckland District Court in April 2021 after a 14 day trial.

Under section 11 of the Fair Trading Act, no person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of services. The District Court found that Vodafone’s naming and marketing of FibreX was liable to mislead the public into thinking FibreX is something that it is not.

Vodafone’s prior history with the Commerce Commission
In 2020, Vodafone was warned by the Commission for misleading consumers about account credits and for representations made in a loyalty discount promotion.

In 2020, the Commission warned Vodafone for misleading consumers about account credits and for representations made in loyalty discount promotion.

In 2019, Vodafone was fined NZ$350,000 for making false representations in invoices it sent to customers after it pleaded guilty and was convicted of 14 charges under the Fair Trading Act for conduct that occurred between January 2012 and December 2018.

In 2017, the Commission issued a warning to Vodafone regarding a specific conduct that breached the Fair Trading Act.

In 2016, Vodafone was fined NZ$165,000 in the Auckland District Court after pleading guilty to making false price representations in breach of the Fair Trading Act in invoices sent to customers who signed on to the ‘Red Essentials’ mobile phone plan between January and December 2014.

In 2013, the Commission and Vodafone reached an out of court settlement over misleading conduct in relation to Vodafone’s promotion of its ‘Broadband Lite’ service.

In 2012, Vodafone was fined NZ$960,000 in relation to advertising campaigns it ran from October 2006 – February 2009 for various broadband and mobile phone promotions including Broadband everywhere, Supa Prepay Connection Pack, and Largest 3G Network.

In 2011, Vodafone pleaded guilty to breaching the Fair Trading Act in relation to its Vodafone Live! mobile phone internet service. Vodafone misled consumers that its Vodafone Live! service was ‘free to browse’ and customers would be warned before incurring any charges.

That same year, Vodafone was fined $81,900 for breaching the Fair Trading Act in relation to its NZ$1 a day mobile phone internet data charges promotion.

It stated that it would only charge customers NZ$1 a day for 10MB of casual data usage, but failed to disclose that the NZ$1 threshold would be reached once the customer had used 204.8 kilobytes of data.

This first appeared in the subscription newsletter CommsWire on 18 May 2022.

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