Vodacom fined $53,000 in South Africa for 75% cancellation fee on fixed-term contracts

Vodacom has been slammed with a 1 million Rand ($53,000) administrative fine in South Africa for violating the country’s Consumer Protection Act (CPA). The fine was imposed by the National Consumer Tribunal. The acting commissioner of the National Consumer Commission (NCC), Thezi Mabuza revealed that Vodacom will also be refunding certain contract cancellation fees.

Over the period between 2020 and 2022, numerous consumers raised petitions, claiming that Vodacom obstructed their attempts to terminate fixed-term contracts by imposing a hefty 75% cancellation penalty.

The NCC responded to these claims, stating that Vodacom’s conduct was unethical by imposing terms and conditions that negated the consumers’ right to cancel their fixed-term contracts.

In Mabuza’s words, “During our engagement with them [Vodacom], they had agreed to repay some of the consumers that cancelled their contracts.”

Mabuza emphasized that Vodacom’s penalty does not excuse its violation of the Consumer Protection Act. She said, ”At this point, the only group we have information about are the consumers who lodged complaints. However, we are uncertain about how much this provision benefited Vodacom.”

The Acting Commissioner of the NCC further conveyed the desire for this interaction with Vodacom to serve as an example for other suppliers, urging them to examine their contracts and conduct while respecting consumers and consumer law.

A Vodacom spokesperson informed MyBroadband that they are in the process of reviewing the NCC’s decision, stating, “Vodacom notes the ruling of the National Consumer Tribunal. As at present, we are studying this determination and will, in due course, give our views on the matter.”

The network operator recently detailed its approach to fixed-term contract cancellations for MyBroadband. In accordance with South Africa’s Consumer Protection Act (CPA), mobile network subscribers can terminate a fixed-term contract before its original end date. The process involves providing the network operator with a 20 business days’ notice of cancellation, and they may then impose a “reasonable” cancellation fee.

Vodacom explained its procedure, stating that, “A quotation will be generated, and sent to the customer. The quotation includes monthly subscription costs as well as device fees multiplied by the number of months remaining on their contract.”

A Spokesman from the mobile communication company continued, “The customer will receive a standard 25% discount on their remaining subscription amount, in addition to the fees multiplied by the number of months remaining on their contract.”

Importantly, different mobile network operators in South Africa have varying approaches to contract cancellations.

For instance, MTN charges customers one month’s subscription and the outstanding handset amount for non-SIM-only contracts. Cell C’s cancellation fee includes the outstanding phone amount, the current month’s invoice, and 50% of the subscription fees for the remaining contract period. Telkom, on the other hand, charges the outstanding handset amount and a fixed R809 cancellation fee.

Recall that three months back, Vodacom Tanzania was slammed with a lawsuit worth Sh10 billion (about $4M) by Sayida Masanja, a businessman, who claims the telecom operator fed his personal information to Open AI’s ChatGPT without authorization.

The Sh10 billion that Masanja wanted Vodacom to cough up was to compensate for the loss of privacy which he felt the telco helped facilitate. Aside from providing ChatGPT with his user data, the plaintiff said that the chatbot also gained access to his mobile network information.

Read More: Tanzanian businessman sues Vodacom for $4M over data privacy violation

Vodacom and the role of consumer rights regulatory bodies

Consumer rights are paramount in a marketplace driven by products and services. Regulatory bodies play a critical role in safeguarding these rights, ensuring that companies adhere to the law and maintain ethical practices. Regulatory bodies, such as the NCC are established by governments to enforce consumer protection laws. They are responsible for policy oversight, investigation and enforcement, and consumer education.

In the context of South Africa, the NCC is a crucial regulatory body. Its mission is to protect and promote the interests of consumers. The NCC handles complaints and monitors company compliance with consumer protection laws.

The effectiveness of regulatory bodies can be evaluated through several factors, including their ability to enforce consumer protection laws, the extent of consumer awareness, and the impact of regulatory recommendations and policies on companies.

However, despite their crucial roles, regulatory bodies face challenges in upholding consumer rights. Limited resources, rapidly evolving markets, and the need to ensure public awareness of consumer rights are some of the challenges they encounter.

Read More: William Mzimba to resign as the CEO of Vodacom Business in September 2023