Vodafone fined $81,900 in $1-a-day mobile broadband case

Update Nov 21: Vodafone has been fined $81,900 over a misleading $1-a-day mobile broadband promotion.

The sentence comes less that two months after the company was fined $402,375 in the first of six cases brought by the Commerce Commission. 

The company's conduct was careless and inadvertent, Judge Anne Kiernan found. The judge gave the company a 10% discount on her starting point of $90,000 in recognition of its cooperation.

The maximum fine for for a company under section 11 of the Fair Trading Act is $200,000. The Commerce Commission had asked for a $140,000 to $160,000. Vodafone's counsel had suggested $64,000.

Speaking to NBR immediately after the hearing, Vodafone NZ chief marketing officer Greg Campbell focussed on the fact judge ruled his company's offending inadvertent. The Commerce Commission has pushed for a ruling it was reckless.

Liable to mislead
Today's penalty hearing at the Auckland District Court followed a September 27 verdict by Judge Kiernan, who found Vodafone’s $1 a day mobile broadband promotion, run from July to November 2008, was "liable to mislead the public".

In finding Vodafone guilty, Judge Kiernan sided with Commerce Commission lawyer Nick Flanagan, who said customers thought they were paying "$1 a day" for 10 megabytes (MB) of data but could hit the $1 threshold after downloading just 0.2MB (because data to that level was charged at $5 per megabyte). Data up to 10MB was zero-rated. Beyond 10MB, the charge was $1 per megabyte.

On its website, Vodafone said, "if you use less than 10MB a day, we'll only charge you for what you'll use." In fact, the $1 charge kicked in at 0.2MB, or 2% of the 10MB cap.

At today's penalty hearing, Mr Flanagan said "Vodafone failed to disclose [the $5/MB rate]. There was "literally no way for customers to determine that rate on Vodafone's website, which was a natural place for people to seek more information."

The offending was not careless but reckless, Mr Flanagan said, because Vodafone was already "on notice" about the way it promoted pricing after the earlier "Live" case (see below). Although it modified its website after being approached by the commission, it did not after earlier complaints from customers.

Vodafone said the plan was cheaper than the $11.25 per megabyte deal that proceeded it. For its time, it was a breakthrough price, Mr Campbell told NBR.

Judge Kiernan said the unknown number of customers who took part in the deal had been misled by an unidentifiable amount under $1 a day over the course of the 126 days covered by the charge. This was contrasted to the "hundreds of dollars per month" in unexpected charges the earlier Live promotion had cost some customers.

Second case of six
The case was the second in a series of six brought by the Commerce Commission under the Fair Trading against what it alleges were misleading Vodafone promotions run at various points between 2006 and 2008. Vodafone is defending all charges.

The six cases:

1. "Completely free" Vodafone Live mobile internet promotion; customers charged steep mobile data charges when they unknownling strayed beyond Vodafone's free "Live" internet content (Vodafone pleaded guilty to five Fair Trading Act breaches; sentenced to $402,375 fine plus costs on August 12, 2011)
2. $1 a day broadband promotion (Vodafone found guilty, sentenced to $81,900 in today's penalty hearing)
3. $10 free airtime credit (adjourned until November 24)
4. The extent of the coverage of Vodafone’s 3G mobile broadband service, made in Vodafone’s ‘broadband everywhere’ marketing campaign between October 2006 and April 2008 (case pending)
5. The price of a Sony Ericsson W200i mobile phone between July and August 2007 (case pending)
6. The size of Vodafone’s mobile phone network between September 2008 and February 2009 (case pending)

Update Oct 19:  The Commerce Commission and Vodafone were back in the Auckland District Court today for the third case in a series of six relating to charges around allegedly misleading advertising.

Today's case involved the availability of a $10 free airtime credit for customers who registered their details on Vodafone’s website between May 2007 and September 2008. The commission alleges there were problems registering to get the $10 bonus, breaching the Fair Trading Act.

The proceedings were brief, with an adjournment granted until November 24 to allow both sides time to gather information.

Vodafone has chosen to contest all six cases brought by the commission.

The company lost the first case, over "free" mobile internet (below) and was fined $402,375 plus costs. 

It also lost the second (over a $1/day mobile broadband promotion) for which a penalty hearing will be held on November 10.

Vodafone faces four more false advertising charges
Sept 27 Vodafone has apologised to customers after being found guilty of a second misleading advertising offence.

But the Commerce Commission has confirmed to NBR that four more court dates are on the way, all relating to allegedly misleading promotions.

Yesterday, an Auckland District Court found Vodafone guilty of misleading customers – the carrier’s second such conviction within six weeks.

Vodafone defended the charge, but Judge Anne Kiernan said Vodafone’s $1 for 10MB a day promotion, run from July to November 2008, was "liable to mislead the public".

Judge Kiernan sided with Commerce Commission lawyer. Nick Flanagan who said customers thought they were paying "$1 a day" for 10 megabytes of data but they were actually charged $1 after using only about 2% of the 10MB allocation.

A fine will be set following a penalty hearing.

The first offence
On August 12, Vodafone was fined fined $402,375 plus costs over a 2007/2008 promotion Vodafone Live promotion that used the phrases "completely free", "absolutely free" and "you won't be charged."

Some Vodafone customers did not realise they were being charged a high rate ($11 per megabyte) when they moved beyond the company's "walled garden" Live service to access the regular internet on their phones.

Contrite
"We want to apologise to customers," Vodafone's Tom Chignell told NBR this morning over yesterday's $1/10MB conviction.

The GM added, "it was something we corrected pretty quickly at the time. It was the first data bundle in New Zealand and it was very early days."

Mr Chignell could not immediately say if Vodafone would appeal the verdict.

A spokeswoman said the Commerce Commission was pleased with the outcome, but declined further comment until after the penalty hearing.

In the August Vodafone Live case, involving five charges, the commission sought a $500,000 fine (the maxium for the five Fair Trading Act breaches was $1 million); the judge sentenced Vodafone to a $402,375 fine, plus costs.

The maximum fine per breach of the Fair Trading Act is $200,000.