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Vodafone Failure to Verify Identity of Australian Customers Securities Class Action

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Telecommunications companies are highly regulated, and the complaint for this class action claims that Vodafone did not follow Australian laws requiring that companies verify customer identities before selling them prepaid mobile telephones.

The class for this action is all persons and entities who acquired Vodafone American Depositary Receipts (ADRs) between February 11, 2015 and January 11, 2018.

British firm Vodafone is one of the largest telecommunications companies in the world, offering a range of services in voice, messaging, data, and fixed communications. It offers mobile services in twenty-six countries, has partnerships with mobile networks in fifty more, and provides fixed broadband operations in nineteen markets.

This means that it must comply with legal requirements in different areas. The complaint quotes Vodafone’s 2015 Disclosure Report as stating, “Refusal to comply with a country’s laws is not an option. If we do not comply with a lawful demand for assistance, governments can remove our licence to operate, preventing us from providing services to our customers.” Compliance with laws, then, is a basic condition of operation.

According to the complaint, Vodafone acknowledged the importance of following laws in its 2015 Legal Annexe to its earlier Disclosure Report, its Form 10-F 2015 Annual Report filed with the US Securities and Exchange Commission (SEC), the 2015 Disclosure Report mentioned above, and its 2017 Disclosure Report. The complaint quotes from all of these documents, alleging that Vodafone was giving the impression that it was careful about compliance.

On January 10, 2018, after the close of the market, the Australian Communications and Media Authority (ACMA) announced that it had investigated a subsidiary of the company, Vodafone Network Pty Limited (also known as Vodafone Australia) had failed to follow Australian law by allowing customers to buy prepaid mobile phones without first verifying their identities. Vodafone’s website had allowed customers to select an option claiming their identities had been verified in a store, but no further follow-up was done to make sure of this.

As a result, the report claimed that between January 6, 2015 and January 6, 2016, the company “failed to verify the identity of at least 1,028 customers before activating their prepaid mobile services” thereby violating Australian law. The company had entered into what the complaint calls “an enforceable undertaking” to “improve its processes for verifying identity” of prepaid customers. At this news, the company’s ADRs dropped roughly 3.5% over two trading days.

The complaint claims that the public statements Vodafone made about laws and compliance were misleading and false, in violation of Securities Exchange Act of 1934.

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