One NZ Fined for Misleading FibreX Marketing​

In a recent development, telecommunications company One NZ (formerly known as Vodafone NZ) has been subjected to a significant penalty for engaging in misleading marketing practices regarding its FibreX broadband service. The High Court, acting on behalf of the New Zealand Commerce Commission, delivered a judgment that highlights the importance of trust and transparency in business transactions. This article delves into the details of the case, shedding light on the misleading practices employed by One NZ and the implications for consumers and competition in the broadband services market in New Zealand.

Background

The saga began in 2016 when One NZ launched its FibreX broadband service, which utilized Coaxial cable technology. The company’s marketing campaign misled consumers into believing that FibreX was fiber-to-the-home (FTTH) broadband, a superior technology to traditional coaxial cable. Additionally, One NZ falsely claimed that FibreX was the only available broadband service at certain addresses, thus limiting consumer choice.

The Misleading Conduct

One NZ’s misleading conduct persisted over a two-year period, from 2016 to 2018. The Commerce Commission took the telecommunications giant to court on 18 charges under section 11 of the Fair Trading Act 1986 (FTA). These charges encompassed the misrepresentation of FibreX as FTTH broadband and the false suggestion that it was the sole broadband option available to consumers.

The Legal Battle

In April 2021, the District Court convicted One NZ on these charges and imposed a fine of $2.25 million. However, both One NZ and the Commerce Commission appealed the decision. One NZ sought to overturn its convictions on branding charges and reduce the penalty, while the Commerce Commission argued that the fine was inadequately low given the seriousness of the offenses.

The High Court Appeal Judgment

In a recent appeal judgment, the High Court dismissed One NZ’s appeal against its convictions and also responded to the Commerce Commission’s appeal against the original fine. Justice Simon Moore, presiding over the case, acknowledged the need for a greater penalty that would “sting” One NZ and serve as a deterrent. Consequently, the original fine of $2.25 million was quashed, and a new penalty of $3.675 million was imposed.

“In my view, a greater uplift is required in order to ensure the penalty ‘stings’ from Vodafone’s perspective and serves as a personal deterrent, particularly given Vodafone’s history of non-compliance with the FTA. On the other hand, the fine must retain proportionality to the offending.” – Justice Simon Moore

Impact on Consumers

The misleading conduct of One NZ had significant implications for consumers. By falsely promoting FibreX as FTTH broadband, the company denied consumers the ability to make informed choices about their broadband options. This distortion of information not only harmed consumers but also created an uneven playing field for competitors who were selling genuine fiber-to-the-home services. The trust that consumers place in businesses’ marketing claims was compromised, impacting their ability to make informed purchasing decisions.

Distortion of Competition

One NZ’s misleading marketing tactics not only deceived consumers but also distorted competition in the broadband services market. The company gained an unfair advantage over competitors who were offering true fiber-to-the-home services. This unfair advantage hindered healthy market competition and undermined the government’s investment in the Ultra-fast Broadband (UFB) rollout, which aimed to stimulate consumer uptake of fiber-to-the-home broadband services.

The Significance of the Judgment

The High Court’s judgment against One NZ marks a significant victory for consumers. Commerce Commission Chairman, John Small, emphasizes the importance of trust and transparency in business communication. He affirms that the Fair Trading Act requires claims to be truthful and accurate, enabling consumers to make informed purchasing decisions. The severity of the penalty underscores the gravity of One NZ’s misleading conduct and sends a clear message to other large businesses.

One NZ’s Response

Following the judgment, a spokesperson for One NZ expressed disappointment with the outcome and respectfully disagreed with the Court’s decisions. The company is currently considering its response to the judgment but has declined to comment further at this time. It remains to be seen whether One NZ will take any further legal actions or make changes to its marketing practices.

Looking Ahead

The High Court’s judgment against One NZ serves as a reminder to businesses of the importance of ethical marketing practices and the consequences of misleading consumers. It also highlights the role of regulatory bodies, such as the Commerce Commission, in upholding fair trading standards and protecting consumer rights. Moving forward, it is crucial for businesses to prioritize transparency, accuracy, and trustworthiness in their marketing and promotional activities. The case of One NZ’s misleading conduct and subsequent record-breaking fine serves as a cautionary tale for businesses operating in New Zealand. Trust is the foundation of any successful business relationship, and consumers deserve truthful and accurate information to make informed decisions. The High Court’s judgment not only holds One NZ accountable for its misleading practices but also sends a strong message to other businesses that misleading conduct will not be tolerated. It is hoped that this landmark case will foster a more transparent and trustworthy business environment in New Zealand’s broadband services market.