ComCom Action Delivers $3.675 Million ‘sting’ To One NZ For Kiwi Consumers

The Commerce Commission says a record $3.675 million fine imposed on One NZ (formerly Vodafone NZ) for misleading consumers in the marketing of its FibreX broadband service is a significant win for Kiwi consumers.

Commission Chair, John Small, says the penalty is the highest ever handed down by a court under the Fair Trading Act – reflecting the seriousness of the company’s conduct between 2016 and 2018 – and will serve as a strong deterrent to other large businesses.

“This judgment against One NZ is a significant win for Kiwi consumers – because every New Zealander should be able to trust what businesses are saying in their marketing and promotion of their services.

“The Fair Trading Act requires claims to be truthful and accurate in order to give you the information you need to make an informed purchasing decision.

“In this case, One NZ’s conduct was misleading and, in addition to the consumer harm, it distorted competition for the supply of broadband services in New Zealand,” Dr Small says.

In an appeal judgment released by the High Court on Friday (11 August 2023), Justice Moore allowed the Commission’s appeal against the original fine imposed by the District Court and said a greater uplift was required in order “to ensure the penalty ‘stings’ from [One NZ’s] perspective” and serves as a deterrent – particularly given [One NZ’s] history of non-compliance with the Fair Trading Act. The High Court also dismissed One NZ’s appeal against its conviction on nine of the original charges.

One NZ was found guilty by the District Court in 2021 for misleading consumers into believing its FibreX service was fibre-to-the-home (FTTH) broadband, when it was not. It was also found guilty of falsely suggesting to consumers that FibreX was the only available broadband service at their address, which was not true.

One NZ was fined $2.25 million by the District Court in April last year, which the Commission appealed, arguing that the sentence was ‘manifestly inadequate’ and did not appropriately reflect the seriousness of the offending, and the size and financial resources of the business.

The promotion of FibreX denied consumers the ability to make an informed choice about the most appropriate broadband option for their needs.

“By misleading consumers into believing FibreX was fibre-to-the-home, One NZ distorted competition by giving itself an unfair advantage over its competitors who were selling true ‘fibre’, including local fibre companies and other retailers,” Dr Small says.

One NZ’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 the FibreX campaign.

The appeal judgment can be read on the High Court website here.

Background
Vodafone NZ (renamed One NZ) was sentenced in the Auckland District Court on 14 April 2022 on 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 comprised:

• 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-coaxial (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

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In May 2022, the Commerce Commission filed an appeal in the High Court against the record $2.25 million fine imposed on Vodafone NZ Limited (Vodafone), arguing that it was manifestly inadequate. Read more

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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. Both the District Court and the High Court found that Vodafone’s naming and marketing of FibreX was liable to mislead the public into thinking FibreX was something that it was not.

One NZ’s prior history with the Commerce Commission

• In July 2023, The Commerce Commission issued a Stop Now Letter to One NZ for representations made in its campaign promoting “100% mobile coverage. Launching 2024”.
• 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 to 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.
• In 2011, 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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