Vodafone Australia admits to misleading carrier billing service

After an Australian Competition and Consumer Commission (ACCC) investigation, Vodafone Australia has admitted misleading consumers through its third-party Direct Carrier Billing (DCB) service.

The investigation looked into transactions made between 1 January 2013 to 1 March 2018, though it is most likely Vodafone broke the rules upon the introduction of an Australian Securities and Investments Commission Act in 2015.

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

The service was first introduced in January 2013 allowing customers to purchase digital content from third party developers such as games, ringtones and apps, with charges being applied to pre-paid and post-paid accounts.

The issue which Vodafone seems to be facing is the service was automatically applied to customer accounts, with purchases being made with one or two clicks. As the customer was not suitably informed, the service has been deemed to be misleading.

Vodafone has already begun the process of contacting impacted customers and will be offering refunds where appropriate. The telco has phased out the majority of the service already, owing to an increasing number of complaints during 2014 and 2015.

While a final judgment has not been released just yet, a confirmation and fine will likely follow in the next couple of weeks, other Australian telcos have been found guilty of the same offence. Both Telstra and Optus have been fined AUS$10 million for their own misleading carrier billing services.

Although it is hardly rare for a telco to be found on the wrong side of right, especially in Australia where the ACCC seems to be incredibly proactive, such instances will create a negative perception at the worst time for the telcos.

In an era when the telcos are searching for additional revenues, carrier billing initiatives are an excellent option. Assuming of course the telcos don’t mess it up.

The digital economy is becoming increasingly embedded in today’s society though there are still many consumers who will begrudgingly hand over credit card details to companies with whom they are not familiar. This mistrust with digital transactions could potentially harm SMEs while providing more profit for the larger players who have established reputations on the web.

In this void of trust and credibility, the telcos have an opportunity to step in and play the intermediately as a trusted organization; how many people have an issue with handing credit card information over to a telco?

There are plenty of examples of this theory in practice; Amazon or eBay are the most obvious and most successful. These are online market places which allow the flow of goods and cash between two parties who may not have had a prior relationship. The consumer might have an issue paying Joe Bloggs Ltd. as there is little credibility, though many trust the likes of Amazon and eBay, allowing the third party to manage the transaction and take a small slice of the pie.

Carrier billing can be an excellent opportunity to add value to a growing digital ecosystem, using the consumer trust in the telcos to drive opportunities for those businesses which want to grow online. However, should there be a perception that the telcos do not act responsibly with a customers’ bill, this opportunity will dry out very quickly.

Aside from costing Vodafone a couple of million dollars, this also dents the credibility of the telco (and overall industry by association). This example suggests it is just as risky purchasing goods through the telco as it is an unknown supplier online.