Vodafone to Pay Damages over Third-Party Billing Services

Friday 19 July 2019 @ 10.59 a.m. | Legal Research | Trade & Commerce

In a recent Media Release from Australia’s consumer watchdog (the Australian Competition and Consumer Commission (“ACCC”)), it was revealed that Vodafone Hutchison Australia (“Vodafone”) has admitted to making false and misleading statements about its third-party Direct Carrier Billing (“DCB”) service and has announced it will pay damages to customers affected by this service. See previous TimeBase article for more on this topic.

Background

From at least 1 January 2013 to 1 March 2018, the DCB service was marketed and provided by third parties who paid Vodafone commissions for sales to its customers.

The DCB service allowed customers to purchase digital content from third party developers such as games, ringtones and apps.  The service was automatically enabled on Vodafone customers’ mobile accounts, and purchases could occur with as little as one or two clicks, with the purchases being charged on the customers’ next Vodafone bill.

The Media Release also reveals that Vodafone admitted that it likely breached the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) from at least 2015, by charging consumers for content they had not agreed to buy or had purchased unknowingly.

Comment from the ACCC

Chair of the ACCC, Rod Sims said in the Media Release:

“Through this service, thousands of Vodafone customers ended up being charged for content that they did not want or need, and were completely unaware that they had purchased. Vodafone has undertaken to contact potentially affected customers and offer refunds where appropriate. It will also review any complaints and deal with those customers in good faith. Other companies should note, money made by misleading consumers will need to be repaid.”

The Current DCB Service

Vodafone’s current DCB service is only available for a limited amount of content and requires express customer agreement, and it has not been the subject of complaints to the ACCC.

Vodafone Australia's website currently lists Spotify Premium, Norton, Google Play as some of the third party providers which provide content for purchase using Pay With Vodafone.

Undertakings by Vodafone

Responding to an increase in complaints about the service during 2014 and 2015, Vodafone began phasing out DCB subscriptions in mid-2015, and cancelled its arrangements with certain third-party providers of digital content. Until March 2018, Vodafone still allowed one-off charges without any identification verification.

Those changes instigated by Vodafone coincided with a substantial decrease in complaints both to the telco directly and to the Telecommunications Industry Ombudsman (“TIO”). Vodafone has given a Court Enforceable Undertaking relating to the billing service and has undertaken to:

  • Refund consumers who had previously complained to Vodafone and to the Telecommunications Industry Ombudsman and have not been fully refunded;
  • Contact customers charged for the most problematic third-party content providers (Gamifive, Browser Games, Jamster, Play Planet, iGirls, Waala Mobile and iFortune) and refund customers who apply for a refund where they had unintentionally purchased that content without their knowledge or consent; and
  • Deal directly with future complaints in good faith.

Comment from Vodafone

Speaking to Computerworld, a spokesperson for Vodafone said:

“We never want to see any customer charged for a service they don’t want. We accept that some of our customers were provided with Direct Carrier Billing services they did not want and we’ve taken steps to prevent that happening again. We apologise to our customers who were affected and will ensure they are notified about our refund program. We will start contacting affected customers in the next few months and encourage them to contact Vodafone if they have questions or concerns.”

Previous action from the ACCC

CRN has reported that Telstra and Optus being fined for similar practices regarding DCB services. In February 2019, Optus was fined $10 million for its own DCB services after refunding 240,000 customers for their unwanted bills. Optus paid out approximately $8 million in customer refunds and $13 million to third party providers.

The ACCC estimates Optus charged customers approximately $195 million in third party bills, earning $65.8 million in commissions between 2012 and 2017.

In September 2018 Telstra refunded $9.3 million to 72,000 customers that were charged for Premium Direct Billing digital content they didn't want from the telco's third-party billing service. In this instance, the ACCC estimates that premium direct billing services brought in approximately $61.7 million in net revenue for Telstra before it was closed down in 2017.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

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