Vodafone tripped up by the Fair Trading Act, ordered to pay fines to the tune of $400k

It seems not all is well and fair in land of telco advertising. While Vodafone may be busy reviewing its agency partners, the Commerce Commission has been busy reviewing Vodafone over allegations it has been misleading customers with its broadband and mobile phone promotions between 2006 and 2009. Six cases have been brought up against Vodafone and the first of those to reach court has resulted in the telco being fined $402,375 plus court costs late last week after it pleaded guilty to breaching the Fair Trading Act in relation to its Vodafone Live! mobile phone internet service. Vodafone says it will defend the charges for the remaining five cases.

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.

Vodafone Live! was described by Vodafone as a ‘walled garden’, in which its customers could access products and services offered for free by Vodafone without incurring the usual costs related to accessing the wider internet.

Customers were in fact not charged when roaming within the confines of the Vodafone Live! Service, that much is true. The problem arose when customers left Vodafone Live! The Commerce Commission says customers were not adequately notified that they had left and therefore incurred charges for downloading and purchasing products or services.

Add to that the fact that 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!, and you really start to see the case build up. 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.

Commission Competition manager Stuart Wallace says 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.

“It is unclear just how many customers were affected, as Vodafone did not keep detailed records of complaints. But Vodafone has agreed that it was likely to have involved significant numbers of its customers and large amounts of money. This was a serious design flaw which resulted in many customers incurring unwanted costs,” he says.

Vodafone has since gone on to refund some affected customers and has changed the way it promotes its Vodafone Live! Service. And while it has also changed how it charges for data services, Wallace says Vodafone was slow to respond to the problem, with the offending continuing over a 14 month period. 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.

“In this case, the Vodafone Live! service was new to the market. Vodafone paid insufficient attention to how customers would be likely to use the service and the language used to promote the service blurred the line as to what was actually free,” says Wallace.

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