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.
