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Vodafone NZ fined NZ$165,000 for Red Essentials plan pricing error

Vodafone failed to backdate a NZ$10 discount on its Red Essentials plan for more than 15,000 customers, overcharging them by a collective NZ$92,000 in 2014.
Written by Corinne Reichert, Contributor

Vodafone NZ has been fined NZ$165,000 for providing misleading information to its customers on its "Red Essentials" mobile phone plan, and overcharging them by a combined NZ$92,000.

The fine, handed down by the Auckland District Court, came as a result of the New Zealand Commerce Commission (ComCom) filing charges in May for Vodafone's breach of the Fair Trading Act.

Specifically, Vodafone NZ had reduced its Red Essentials plan from NZ$79 per month down to NZ$69 in January 2014, but its billing system continued charging customers who signed up for the duration of 2014 NZ$79.

As a result, misleading invoices were sent to around 15,000 customers, overcharging most of them by slightly under NZ$1 per week.

Vodafone has since refunded these amounts to all affected customers.

"It is vital that businesses invest in making sure they have strong compliance processes that can support these types of promotional offers, particularly when selling products to a significant customer base," Commissioner Anna Rawlings said.

"Consumers rely on companies to invoice and debit them accurately, as many do not check the finer details. Overcharging a large number of customers a small amount can result in firms receiving large sums of money they are not entitled to, so they need to be vigilant to avoid misleading consumers and breaching the Act."

Vodafone said it accepts its error, apologising to affected customers and saying it has since made "considerable changes" to its billing processes in relation to backdating and discounting.

"Vodafone accepts the penalty of NZ$165,000, and acknowledges that the customer service in this instance did not meet our own standards nor customers' expectations," Vodafone NZ said in a statement to ZDNet.

"Throughout the proceedings, Vodafone fully cooperated with the commission and has demonstrated that corrective action has been put in place to avoid repetition of similar customer service errors."

Vodafone was also fined more than NZ$400,000 under the Fair Trading Act in August 2011 for misleading representations on its Vodafone Live product; fined NZ$82,000 in November 2011 for misleading its mobile customers over NZ$1-a-day data charges; fined NZ$960,000 in September 2012 for its Broadband Everywhere, Supa Prepay Connection Pack, and Largest 3G Network advertising campaigns; and paid out a settlement more than NZ$260,000 in January 2014 to customers for its Broadband Lite service promotion.

The ComCom in March also published a report into the state of mobile telecommunications competition among business customers, finding that the dominant perception about Vodafone NZ was that it is "unresponsive".

Half of all Vodafone business customers surveyed said they were unlikely to complain about significant costs, however, while 81 percent reported being "reasonably satisfied".

Out of all respondents to the research, 25 percent rated Vodafone as having the most reliable coverage in New Zealand; 24 percent as having the best customer service; 23 percent as having the best pricing; 29 percent as being the best at good invoicing; and 24 percent as the best at bundled solutions.

Vodafone was also voted by 27 percent of all respondents as having the best international roaming service.

The ComCom is also looking into Vodafone NZ's proposed merger with Sky Network Television, after the two reached an agreement in June to form an integrated telco and media group.

The regulator published a Statement of Preliminary Issues on the matter, with responses from industry accusing the two companies of trying to squeeze the competition out of the wholesale premium live sport and entertainment content market, the retail residential fixed-line broadband market, the retail mobile broadband market, and the pay TV market.

"We believe if the Commerce Commission blocked the proposed merger, Sky would be forced by commercial realities to make all of its sports content available online and on-demand -- and via wholesale arrangements with lots of parties that help distribute this content to New Zealand consumers," Spark New Zealand general manager of Regulation John Wesley-Smith said.

"A merged Sky/Vodafone will be able to leverage its monopoly power in the sports market, to the detriment of consumers. That's why we're asking the Commerce Commission to reject the proposed merger in its current form."

If approved by shareholders, the merger will occur via Sky acquiring all Vodafone NZ shares for a total purchase price of NZ$3.44 billion through the issue of new Sky shares, in return giving Vodafone Europe a 51 percent stake in the combined group, in addition to cash consideration of NZ$1.25 billion funded through new debt.

The combined group is predicted to have a net present value of around NZ$850 million.

Vodafone NZ is the number one mobile provider in New Zealand, with more than 2.35 million mobile connections, and the second-largest broadband provider with around 500,000 fixed-line connections. Sky is the most popular pay TV provider in the country, with more than 830,000 subscribers, although its shares have declined by 28 percent over the past year thanks to increasing competition from video-streaming services such as Netflix and Lightbox.

The ComCom is due to make a decision by November 11.

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