Vodafone gets its comeuppance after being slapped with almost $1 million fine for misleading advertising

Vodafone was fined $960,000 today on 21 charges brought by the Commerce Commission over marketing campaigns that breached the Fair Trading act and this figure adds to fines of almost $500,000 imposed in 2011 for six other Fair Trading Act charges, making it the highest total imposed on a single defendant under the act.

Today’s charges were in relation to advertising campaigns run by Vodafone from October 2006 to February 2009 for various broadband and mobile phone promotions including Broadband Everywhere, Supa Prepay Connection Pack and Largest 3G Network.

In sentencing Vodafone, Judge Harvey described the conduct as “gross carelessness”. Vodafone’s Broadband Everywhere campaign was “clearly false and misleading” and had done “significant harm”. Judge Harvey also noted that in relation to the Supa Prepay charges, Vodafone had not acted on concerns raised with the level of seriousness required, even though it had the technology and resources to do so.

It’s a reminder for advertisers to proceed with caution. Stuart Wallace, the commission’s competition manager, said companies needed to ensure the headline messages of their marketing campaigns were not misleading.

“Under the Fair Trading Act it’s the initial impression given to consumers that’s all important. Fine print qualifiers won’t generally save advertising statements that are misleading at first glance,” said Wallace. “Prior to the Commission bringing charges against Vodafone in 2009, we had a significant number of public complaints about Vodafone’s various mobile phone and mobile broadband advertising campaigns. At the time, mobile data and phone packages were relatively new to the market. Customers have no easy way of verifying the claims being made for products like this. This case reinforces that companies need to be especially careful that their marketing materials for new products are not likely to mislead. In issuing these penalties the court has recognised that Vodafone’s actions caused significant detriment to consumers and competitors … The Commission is hopeful that the outcome of the case will provide a significant deterrent to others.”

In a release, Vodafone says it has accepted the penalty (in its headline it used the term settlement, which the NBR said ComCom took umbrage with because it was actually a court-imposed penalty) and Vodafone marketing director Greg Campbell says the company “takes the FTA charges and resulting fine very seriously”.

“In 2006 and 2008, there was a huge amount happening in the world of technology – the mobile internet was emerging, mobile networks were speeding up and customers were really getting a handle on the benefits of being mobile.  In our genuine attempts to communicate these benefits, we accept that we got some things wrong. We did not set out to mislead anyone and we apologise unreservedly.  We accept that we didn’t communicate as clearly as we should have done with our customers and pleaded guilty to the FTA charges back in July. Unfortunately, we can’t turn back the clock on some things that happened four years ago, but since then we have been focused on ensuring our communication is clear and on giving our customers a great experience with Vodafone. We’re working hard to deliver this every time.”

Businesses found guilty of breaching the Fair Trading Act may be fined up to $200,000 for each charge. Where more than one charge is laid, the court may impose a fine greater than $200,000.

The charges:

Broadband Everywhere

Vodafone advertising between 2006 and 2008 gave the impression its 3G network it could be used everywhere but in the fine print it stated, “subject to Vodafone’s 3G broadband coverage.” At the beginning of the promotion, Vodafone’s coverage area was around 42 percent of the population, increasing to around 63 percent by the end of the promotion. Complainants who signed up for the plan found there were difficulties with coverage.

Supa Prepay Connection Pack

Customers who registered their details on Vodafone’s website between May 2007 and September 2008 were entitled to a $10 free airtime credit. Customers complained that they had problems registering for the free credit throughout the 16 months covered by the charges. Despite being aware of these problems, Vodafone continued to market the free credit unqualified throughout this time.

Largest 3G Network

These charges related to the comparative size of Vodafone’s mobile phone network between September 2008 and February 2009. Vodafone’s advertising headline was “Largest and fastest mobile (3G) network” for v3G devices, including vodem UFB sticks and early smart phones. However, Vodafone’s 3G network at the time was around 67 percent of the population compared to Telecom’s 3G network at around 80 percent of the population.

The Commerce Commission withdrew two charges relating to the price of a Sony Ericsson mobile phone between July and August 2007, as it said that was a minor issue as compared to the other charges.  

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