Vodafone Australia concedes it misled customers over direct billing service

Vodafone Australia has become the third local telco to be hit by the Australian competition watchdog over direct billing services.

The Australian Competition and Consumer Commission (ACCC) said on 16 July that Vodafone Australia had admitted to making false or misleading representations about its now defunct third-party Direct Carrier Billing (DCB) service.

Similar to services previously offered by Telstra, Optus and other telcos, Vodafone’s DCB service let the telco’s customers purchase online software and services from third parties, with the charges for that digital content then billed directly to Vodafone customers’ accounts.

According to the ACCC, Vodafone’s DCB service was automatically enabled on its customers’ mobile accounts, meaning purchases could occur in just a couple of clicks, without any identity verification, and be charged back to customers’ next Vodafone bill.

It should be noted that the content was marketed and provided by third parties who paid Vodafone a commission for sales to end customers.

According to the ACCC, Vodafone likely breached the ASIC Act from at least 2015 by charging consumers for content they had not agreed to buy or bought unknowingly.

Vodafone has offered up a court enforceable undertaking that compels it identify, contact and refund customers from as far back as January 2013 who complained either directly to the telco or via the Telecommunications Industry Ombudsman (TIO) about the DCB service.

According to the court enforceable undertaking, published by the ACCC, Vodafone was aware of issues with its DCB service from at least February 2015. These included a two-fold increase in revenue but a three-fold increase in complaints about the DCB service received in the 2014-15 financial year, compared to the year prior.

Moreover, according to the undertaking document, Vodafone agrees that from at least February 2015, it was aware that the operation of its DCB service had led to customers unintentionally purchasing DCB content without their knowledge or consent.

The ACCC, which carried the investigation into Vodafone’s DCB service under a delegation of the Australian corporate regulator’s powers, said that Vodafone began phasing out DCB subscriptions in mid-2015 in response to an increase in complaints about the service, cancelling its arrangements with some third-party content providers.

However, according to the ACCC, customers could still be charged for one-off purchases without any identity verification until March 2018.

“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,” ACCC Chair Rod Sims said. “Other companies should note, money made by misleading consumers will need to be repaid.”

While Vodafone follows Optus and Telstra in being pulled up by the competition watchdog over its direct billing service, it appears to have avoided being slapped with the $10 million fine the two larger telcos were handed over representations relating to their respective direct billing services.

In February, after action by the ACCC, the Federal Court ordered Optus pay a $10 million fine for its “treatment of customers” who unknowingly purchased games, ringtones and other digital content through its third-party billing service. Additionally, Optus committed to refunding affected customers.

Last year, the Federal Court ordered Telstra to pay a $10 million fine for making false or misleading representations to customers in relation to its third-party billing service known as “Premium Direct Billing” (PDB). Telstra also agreed to refund affected customers.

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