One NZ Penalized for Deceptive Marketing of FibreX

In a recent judgment that underscores the value of consumer trust, telecommunications giant One NZ, formerly known as Vodafone NZ, has been handed a substantial fine for misleading its customers. This case, presided over by Justice Simon Moore in the High Court, accentuates the serious consequences of deceptive business practices. This article delves into the intricate details of One NZ’s deceptive advertising of its FibreX broadband service and the broader repercussions for the New Zealand broadband market. 

Case Background 

The controversy traces back to 2016 with the introduction of One NZ’s FibreX broadband service, which was based on Coaxial cable technology. The marketing strategies employed by One NZ led consumers to mistakenly believe that FibreX was a fiber-to-the-home (FTTH) broadband service, which is technically superior to coaxial cable. Additionally, the company incorrectly claimed that FibreX was the exclusive broadband service available in certain areas, thereby restricting consumer choice. 

Nature of Misconduct 

Over a period of two years, from 2016 to 2018, One NZ engaged in misleading conduct. The Commerce Commission, New Zealand’s authority responsible for enforcing fair trading, charged the company with 18 violations under the Fair Trading Act 1986. These charges pertained to falsely representing FibreX as FTTH broadband and suggesting it was the only broadband service available to certain consumers. 

Legal Proceedings and Outcome 

Initially, the District Court found One NZ guilty and imposed a fine of $2.25 million in April 2021. Both parties, One NZ and the Commerce Commission, appealed the decision. One NZ sought to overturn its convictions related to branding and reduce the penalty, whereas the Commerce Commission argued for a higher fine due to the gravity of the offenses. 

The High Court’s Ruling 

In the appeal, the High Court rejected One NZ’s appeal against its convictions and agreed with the Commerce Commission on increasing the penalty. Justice Moore emphasized the need for a more substantial fine that would act as a deterrent. Consequently, the original fine was replaced with a new penalty of $3.675 million. 

Consumer Impact 

The deceptive marketing by One NZ significantly affected consumers, misleading them about the nature of FibreX and depriving them of the opportunity to make informed broadband choices. This not only disadvantaged consumers but also skewed competition, undermining those providing genuine FTTH services. 

Effect on Market Competition 

One NZ’s misleading tactics gave it an unfair edge over competitors offering actual FTTH services. This distortion of competition was detrimental to the integrity of the market and hampered the efforts of the government’s Ultra-fast Broadband (UFB) rollout, which was aimed at promoting FTTH broadband uptake. 

The Judgment’s Importance 

This ruling against One NZ is a significant win for consumer rights. John Small, Chairman of the Commerce Commission, highlighted the necessity for businesses to maintain honesty and clarity in their communications. The stringent penalty emphasizes the seriousness of One NZ’s misleading actions and serves as a warning to other corporations. 

One NZ’s Stance Post-Judgment 

In response to the judgment, a spokesperson for One NZ expressed their disappointment and disagreement with the Court’s decision. The company is contemplating its next steps and has not made further comments at this stage. 

Future Implications 

The High Court’s decision is a stark reminder for businesses about the importance of ethical marketing and the repercussions of deceiving consumers. It also demonstrates the pivotal role of regulatory bodies like the Commerce Commission in maintaining fair trade standards and protecting consumer rights. 

Enough of a deterrant?

The case against One NZ for its  deceptive marketing practices resulting in a significant fine is a lesson for all businesses in New Zealand. Upholding trust and providing accurate information is essential in any business-consumer relationship. This landmark ruling not only holds One NZ accountable but also signals to other businesses that deceptive practices are unacceptable. It is hoped that this case will lead to a more honest and transparent business environment in New Zealand’s broadband service market.