Vodafone incentivised security staff to fine its own franchisees | Vodafone
Vodafone has encouraged security staff to increase “refunds” charged to its franchisees as part of a scheme that has seen the telecommunications group fine its tradespeople millions of pounds for seemingly minor administrative errors.
The policy, which included an alleged £10,000 fine for a franchisee whose error cost Vodafone £7.08, involved setting “key performance indicators” (KPIs) for the telecommunications group’s internal staff to collect annual fines totaling £1.5 million from small businesses running the FTSE 100 company’s high street stores.
The existence of the penalty regime has been disputed for years and forms part of a high court claim brought in 2024 by 62 former Vodafone dealers who claim the mobile phone company used tactics to “unjustly enrich” itself by up to £85 million. MPs compared Post Office Horizon IT scandal.
The court filings also include an allegation that Vodafone was trying to “increase its revenue” as “senior staff were given tasks and encouraged to impose penalties” as part of a policy the group tacitly admitted was flawed.
“We have made a number of changes to our formal processes and management and made a number of goodwill payments to a number of franchisees. For example, we have agreed to refund £4.9 million including VAT,” Vodafone told the Guardian in 2024. [£4m] Across our franchise area (this includes retroactive repayment of fines and reversals).”
But the Guardian has seen new details that suggest the company specifically encouraged its own staff to increase the fines they received from franchisees, while also capping revenues to reduce the cost of running the company’s security department.
While the company did not deny that it set targets for its employees to increase the penalties imposed on its own partners, it emphasized that individuals were not “financially” incentivized to achieve these targets.
According to former Vodafone staff who claimed knowledge of the scheme, it is understood it cost Vodafone £33.20 to investigate each case; This is well below the minimum £350 fine imposed on a franchisee for a first offense.
Figures contained in an internal Vodafone document called the “consequences matrix” detail how these accusations quickly escalated: a second breach within a three-month period resulted in the franchisee losing 15% of their monthly commission, while a third complaint saw this rise to 30%.
According to Vodafone’s internal records, franchisees may experience a reduction in the number of stores in their portfolio due to a fourth complaint, while franchise agreements may be terminated for a fifth violation within a 90-day continuation period.
The matrix does not appear to distinguish between smaller stores and much larger stores located on busy high streets or in busy shopping centres, which are likely to attract higher numbers of customers, complaints and commissions, and therefore fines. Some of the larger Vodafone franchise stores are understood to be earning commissions of between £40,000 and £100,000 a month.
The document also gives examples of possible offenses that could lead to a franchisee being fined; e.g. “not controlling” [a] customer’s delivery address”, “providing incomplete information that will cause the customer to return” and “not applying the correct plan or discount”.
Retractions make up only a small portion of the high court’s claims; The most important area relates to Vodafone’s claim that it imposed “an inexplicably harsh and manifestly unreasonable and/or arbitrary deduction of the plaintiffs’ commission”. [preferred] their own interests” without any proper justification, analysis and/or process.
Many franchisees claim the move has left them facing six-figure debts, the worry of losing their home and a “huge impact” on their mental health.
A spokesman for Vodafone, which continues to challenge the high court claim, said: “We carry out regular inspections of our retail footprint to ensure compliance with legislation and that our customers receive the service they deserve. We have occasionally issued penalties to ensure these obligations are met.”
“Penalties and clawbacks are not imposed to make a profit. They are designed to deter behavior that could lead to poor customer outcomes and non-compliance. We continue to run a successful franchise business with over 350 stores in the UK and the majority of our partners have expanded their business with us.”
The company added that comparisons to the Post Office scandal were “wholly inappropriate”.
