ComCom appeals $2.25 million fine in Vodafone FibreX case

The Commerce Commission has filed an appeal in the High Court against a $2.25 million fine imposed on Vodafone NZ for its offending under the Fair Trading Act.

Vodafone's sentence was for offending during its FibreX advertising campaign and was the largest fine ever to be handed down under the Fair Trading Act.

However, the Commission is arguing that the sentence is manifestly inadequate, believing Vodafone's conduct to be wilful rather than careless.

In addition, the Commission will also argue that it allowed Vodafone to make major commercial gains.

Commerce Commission chair Anna Rawlings says the Commission will argue the fine did not appropriately reflect the seriousness of the offending and the scale of Vodafone's financial resources.

"The Commission sees this case as raising important issues relating to compliance with the Fair Trading Act," Rawlings says.

"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 also initially sought a fine of $5.8 million.

"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," Rawlings adds.

Furthermore, the Commission will ask the High Court to reconsider the evidence presented by individual consumers regarding the harm 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.

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

Of these charges, nine relate to Vodafone's representations on its website about the availability of fibre-to-the-home broadband services, which Vodafone pleaded guilty to on November 16 2018.

The remaining nine arise from Vodafone's branding and advertising of its Hybrid Fibre Cable (HFC) broadband service. Vodafone was found guilty in the Auckland District Court in April 2021 after a 14-day trial.

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.

"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," Rawlings says.

The false advertising also impacted Vodafone's broadband services competition in New Zealand, such as local fibre companies and retailers, giving the company an unfair advantage over its competitors by misleading consumers into believing FibreX was fibre-to-the-home.

Vodafone's FibreX campaign targeted approximately 250,000 households in Wellington, Kapiti and Christchurch, and the company also continued with the campaign despite being contacted by the Commission following consumer complaints.

Vodafone has released a statement acknowledging the ruling, saying the company is "very disappointed with the outcome and respectfully [disagrees] with the Court's decisions.

"While we would rather be focusing on providing great service to current and future HFC customers and inviting customers to decide for themselves about the performance of this product, the Commission has advised us that it will appeal the fine handed down," the statement reads.

"Accordingly, we must respond and will be appealing both the conviction and the fine. Our appeal will set out our strong belief that there are several errors with the original conviction decision and that there are aspects of the FibreX judgment that simply misunderstand the services we sell and are not in the best interests of consumers or future competition.

"We believe healthy digital infrastructure competition and maximising customer choice should be welcomed, to offer New Zealanders a wider range of broadband internet access types depending on what they value most."

Now that the matter is before the court, both the Commerce Commission and Vodafone NZ say they will not be releasing any further comments.