Vodafone NZ has paid out $268,231 to customers in a settlement reached with the Commerce Commission concerning the company’s promotion of the “Broadband Lite” service.

Between July 2009 and September 2011 the telco offered its Broadband Lite service, which enables customers to access the internet from their mobile phones, free to some customers for a three month period but after the free period, the service cost $10 per month.

According to the Commission, if the customer wanted to cancel the service, they needed to notify Vodafone before the free period expired. Vodafone’s terms and conditions advised that the telco would send a text message to customers reminding them of the need to opt-out of the service if they did not wish to be charged.

During this promotion the service attracted more than 146,000 customers and in late 2011 the Commission received complaints mainly from customers who mistakenly thought they were getting the service for only three months, or who did not feel adequately informed of the terms and conditions of the promotion, including the steps they would have to take to opt-out of the service.

The Commission investigated the complaints and decided that some customers were not adequately advised of the terms applying to the service. The investigation also revealed that almost 8,000 customers did not receive the promised ‘opt-out’ reminder text and around 3,000 customers had cancelled the service but were charged for it because the Broadband Lite add-on was not removed from their accounts.

Following enquiries from the Commission, Vodafone initiated its own investigation into the complaints and took active steps to identify and rectify the issues. Vodafone has reviewed and upgraded its Fair Trading Act compliance training programme for all staff.

“In reaching the decision to settle, we took into account the fact that Vodafone put things right as soon as it became aware of the problems," says Stuart Wallace, Consumer Manager, Commerce Commission.

"Nonetheless, the case highlights the potential problems with ’opt-out’ sales promotions.

“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."