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Vodafone Pays Hefty Price For Misleading Consumers

Media Release

Issued 10 September, 2012

Release No. 21

Vodafone Pays Hefty Price For Misleading Consumers

Fines imposed against Vodafone New Zealand Limited for breaches of the Fair Trading Act will total close to $1.5 million. Vodafone has been sentenced in the Auckland District Court today on 21 charges brought by the Commerce Commission over marketing campaigns that breached the Fair Trading Act. Vodafone was fined $960,000 today in addition to fines of almost $500,000 imposed in 2011 for six other Fair Trading Act charges. Total penalties paid by Vodafone are $1,444,275 – the highest ever imposed on a single defendant under the Fair Trading Act. Today’s charges were in relation to advertising campaigns run by Vodafone from October 2006 – 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”. He commented in relation to Vodafone’s Broadband Everywhere campaign that it was “clearly false and misleading” and that it 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. “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,” said Stuart Wallace, Competition Manager.

“In issuing these penalties the court has recognised that Vodafone’s actions caused significant detriment to consumers and competitors,” said Mr Wallace. “Today’s outcome concludes what has been a long-running case for the Commission and we are glad to finally have a resolution. In addition to the penalties imposed by the Court, Vodafone has incurred significant costs in relation to the case as well as unwanted negative publicity. The Commission is hopeful that the outcome of the case will provide a significant deterrent to others.”

“A key lesson of the case is that, when companies prepare marketing campaigns, they need to make sure that the headline message is 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 Mr Wallace.

Background

The Commission laid charges against Vodafone in September 2009 for alleged breaches of the Fair Trading Act in relation to various broadband and mobile phone promotions. The sentencing today concludes the prosecution. The Commission withdrew two charges relating to the price of a Sony Ericsson mobile phone between July and August 2007, as that was a minor issue as compared to the other charges. Today’s charges related to three of Vodafone’s advertising campaigns.

Broadband everywhere These charges related to the extent of the coverage of Vodafone’s 3G mobile broadband service, made between October 2006 and April 2008. Complainants to the Commission who signed up for the plan found there were difficulties with coverage. Vodafone advertising gave impression that 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% of the population, increasing to around 63% by the end of the promotion.

Supa Prepay Connection Pack

These charges related to the availability of a $10 free airtime credit for those customers who registered their details on Vodafone’s website between May 2007 and September 2008. 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 stick and early smart phones. However, Vodafone’s 3G network at the time was around 67% of population compared to Telecom’s 3G network at around 80% of the population.

In August 2011, Vodafone pleaded guilty to the first charge, which related to the Vodafone Live! mobile phone internet service, and was fined over $400,000. For more information, visit:

http://www.comcom.govt.nz/media-releases/detail/2011/vodafone-guilty-of-misleadingvodafone- live-customers-fined-400k/

In November 2011, Vodafone was found guilty of the second charge, which related to $1 a day mobile internet data charges, and was fined almost $82,000. For more information, visit: http://www.comcom.govt.nz/media-releases/detail/2011/vodafone-fined-almost-82k-formisleading- mobile-phone-1-a-day-customers/

Fair Trading Act 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. Only the courts can decide if a representation has breached the Fair Trading Act.

Commission media releases can be viewed at www.comcom.govt.nz/media-releases

ENDS

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