Commission Appeals Record $2.25m Fine In Vodafone FibreX Case

The Commerce Commission has filed an appeal in the High Court against a record $2.25 million fine imposed on Vodafone NZ Limited (Vodafone) for its offending under the Fair Trading Act during its FibreX advertising campaign.

While the sentence imposed in the Auckland District Court on April 14 was the largest-ever fine under the Fair Trading Act, the Commission will argue that it is manifestly inadequate.

Commerce Commission Chair, Anna Rawlings, says the Commission will argue the fine did not appropriately reflect the seriousness of the offending, and the size and financial resources of Vodafone. The Commission will also argue that Vodafone’s conduct was wilful (rather than grossly careless) and allowed Vodafone to make significant commercial gains.

“The Commission sees this case as raising important issues relating to compliance with the Fair Trading Act.

“The fines imposed for this type of offending must be significant enough to deter Vodafone and other large businesses from engaging in this type of conduct in the future.

“The Commission sees benefits in clarifying the application to this case of the Court of Appeal’s decision in 2020 in Steel & Tube, which sets out a framework for sentencing decisions under the Fair Trading Act.”

The Commission had originally sought a fine of $5.8 million and is appealing the $2.25 million sentence.

“We will argue that the District Court did not apply adequate uplift to ensure that the fine sufficiently reflects the offending of a large corporate offender like Vodafone,” Ms Rawlings says.

The Commission will also ask the High Court to reconsider the evidence presented from individual consumers as to the harm that they suffered as a result of Vodafone’s breaches.

Vodafone was found guilty, following a two-week trial, of conduct liable to mislead consumers into believing that FibreX was a fibre-to-the-home broadband service, when it was not. Vodafone also pleaded guilty to charges relating to its online address checker, which suggested to consumers that FibreX was the only available broadband service at their address, when that was not true.

“The promotion of Vodafone FibreX denied consumers the ability to make an informed choice about FibreX or to choose the type of broadband most appropriate for their needs,” Ms Rawlings says.

It also impacted competition for the supply of broadband services in New Zealand. By misleading consumers into believing FibreX was fibre-to-the-home, Vodafone gave itself an unfair advantage over its competitors who were selling true “fibre”, including local fibre companies and other retailers.

Vodafone’s conduct coincided with Government investment of more than $1.5 billion in the roll-out of UFB (Ultra-fast Broadband). This investment had a focus on stimulating consumer uptake of fibre-to-the-home broadband services.

Around 250,000 households in Wellington, Kapiti and Christchurch were targeted by Vodafone’s FibreX campaign.

Vodafone continued with the campaign even after being contacted by the Commission following consumer complaints.

As this matter is now before the court, the Commission will not be commenting further at this time.

The judgment from 14 April 2022 is available on our case register here.

Background
Vodafone was sentenced in the Auckland District Court on 14 April 2022 for 18 representative charges under section 11 of the Fair Trading Act 1986 (FTA) relating to conduct in Wellington, Kapiti and Christchurch, where its “FibreX” branded service was offered, between 26 October 2016 and 28 March 2018.

The 18 charges comprise:

• nine charges relating to Vodafone’s representations on its website about the availability of fibre-to-the-home (FTTH) broadband services, to which Vodafone pleaded guilty on 16 November 2018; and
• nine further charges arising from Vodafone’s branding and advertising of its Hybrid Fibre Cable (HFC) broadband service, of which Vodafone was found guilty in the Auckland District Court in April 2021 after a 14 day trial.

Read more information here.

Under section 11 of the Fair Trading Act, no person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of services. The District Court found that Vodafone’s naming and marketing of FibreX was liable to mislead the public into thinking FibreX is something that it is not.

Vodafone’s prior history with the Commerce Commission

In 2020, Vodafone was

warned by the Commission for misleading consumers

about account credits and for representations made in a loyalty discount promotion.

In 2019 Vodafone was fined

$350,000 for making false representations

in invoices it sent to customers after it pleaded guilty and was convicted of 14 charges under the Fair Trading Act for conduct that occurred between January 2012 and December 2018.

In 2017 Vodafone was

one of four telecommunication companies issued warnings

by the Commission about specific conduct that the Commission considered breached the Fair Trading Act.

In 2016 Vodafone was

fined $165,000

in the Auckland District Court after pleading guilty to making false price representations in breach of the Fair Trading Act in invoices sent to customers who signed on to the ‘Red Essentials’ mobile phone plan between January and December 2014.

In 2013, the Commission and Vodafone reached an out of court settlement over misleading conduct in relation to Vodafone’s promotion of its “Broadband Lite” service.

In 2012 Vodafone was fined $960,000 in relation to advertising campaigns it ran from October 2006 – February 2009 for various broadband and mobile phone promotions including Broadband everywhere, Supa Prepay Connection Pack and Largest 3G Network.

In 2011, Vodafone pleaded guilty to breaching the Fair Trading Act in relation to its Vodafone Live! mobile phone internet service. Vodafone misled consumers that its Vodafone Live! service was "free to browse" and customers would be warned before incurring any charges.

That same year, Vodafone was fined $81,900 for breaching the Fair Trading Act in relation to its $1 a day mobile phone internet data charges promotion. It represented that it would only charge customers $1 a day for 10 megabytes of casual data usage, but failed to disclose that the $1 threshold would be reached once the customer had used 204.8 kilobytes of data.

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