Vodafone New Zealand has paid out NZ$268,231 to customers in a settlement reached with New Zealand regulator the Commerce Commission.
The settlement concerns the company's promotion of a "Broadband Lite" service for mobile internet access.
Vodafone offered the service free between July 2009 and September 2011 to some customers for a three-month period.
After the free period, the service cost NZ$10 per month. If the customer wanted to cancel, they had to notify Vodafone before the free period expired. In addition, Vodafone promised that it would send a text message to customers, reminding them of the need to opt out.
The promotion was successful, attracting more than 146,000 customers.
However, in late 2011, the Commerce Commission received complaints from customers who did not feel adequately informed of the terms and conditions of the promotion, including how to opt out of the service.
The commission investigated and decided that some customers were not adequately advised of the terms. It also found that almost 8,000 customers did not receive the "opt-out" reminder text. A further 3,000 customers had cancelled the service, but were charged because the Broadband Lite add-on was not removed from their accounts.
Vodafone initiated its own investigation and took steps to identify and rectify the issues. It also reviewed and upgraded its compliance training for staff.
"The case highlights the potential problems with 'opt-out' sales promotions," Commerce Commission consumer manager Stuart Wallace said.
"Such promotions require the consumer to take an active step in order to not buy something. Customers can be locked into a deal that they don't want and maybe did not understand. Unless the 'opt-out' condition is very clearly disclosed, these promotions have a high risk of being misleading and in breach of the Fair Trading Act," said Wallace.