Vodafone has been fined more than $400,000 for misleading customers about charges related to its Vodafone Live! mobile phone internet service in what a judge says amounted to "extraordinary" mismanagement.
The telco pleaded guilty to breaching the Fair Trading Act in the first of six cases to reach court that involves the Commerce Commission and Vodafone and was told to pay $402,375 plus court costs.
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.
The commission said between May 2007 and July 2008, Vodafone made a number of claims on its website about Vodafone Live!, a service that gives mobile phone users access to a range of internet-based functions via their mobile phone. Vodafone claimed that Vodafone Live! was “free to browse” and that customers would be notified before incurring any charges for downloading or purchasing products or services.
Although customers were not charged for accessing and browsing within the confines of the service, 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.
Commission competition manager Stuart Wallace said the fact that customers assumed they were using the Vodafone Live! service when they weren’t and the high cost for data resulted in significant “bill shock” for some customers.
One complainant to the commission was charged over $1,300.
Mr Wallace said while Vodafone subsequently refunded some affected customers and changed the way it promoted Vodafone Live!, as well as how it charges for data services, it was slow to respond to the problem. The offending continued over a period of 14 months, he said, and refunds were given reluctantly and on an inconsistent basis.
The company said today it had put in place measures to ensure customers were not confused by data charging, which it was constantly reviewing and refining.
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.”
There was no reason customers should be charged for for services that, if pre-warned, they could have avoided paying for.
He said the problem lay in mismanagement, not technical oversight.
"It is extraordinary that a concern like Vodafone fell down in such an elementary way.”
Wallace said it was unclear just how many customers were affected, as Vodafone did not keep detailed records of complaints.
But Vodafone agreed it was likely to have involved significant numbers of its customers and large amounts of money.
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, Wallace said.
He said the Vodafone Live! service was new to the market when introduced, and the telco paid insufficient attention to how customers would be likely to use the service and the language used to promote it, blurring the line as to what was actually free.
“At the time mobile internet was a premium service within the telecommunications arena and as such Vodafone was able to charge its customers high data rates to use the service.
"Providers need to be
certain that their marketing and promotions do not mislead consumers,
who often have no way of easily verifying the claims being made. This is
especially necessary when a new or innovative product is being
launched, as customers will not have built up any understanding of its
use or cost.”
Idealog has been covering the most interesting people, businesses and issues from the fields of innovation, design, technology and urban development for over 12 years. And we're asking for your support so we can keep telling those stories, inspire more entrepreneurs to start their own businesses and keep pushing New Zealand forward. Give over $5 a month and you will not only be supporting New Zealand innovation, but you’ll also receive a print subscription, an Idealog t-shirt and a copy of the new book by David Downs and Dr. Michelle Dickinson, No. 8 Recharged (while stocks last).