ASA Adjudication on Phones 4 U Ltd

Ad

a. An internet banner ad for Phones 4 U stated "FREE Nokia N95 Only £17.50 a month. Click here" and "Free Nokia N95 500 minutes and 500 texts FREE. Click here".

b. Another internet banner ad for Phones 4 U stated "FREE Nokia N95 Only £17.50 a month. 500 minutes and unlimited texts FREE".

Issue

1. two complainants challenged whether ads a and b were misleading, because when they clicked through to the website the phone cost £35 a month.

2. one complainant challenged whether the claim "unlimited texts FREE" in ad b was misleading, because when he clicked through to the website the offer was limited to 500 texts.

CAP Code (Edition 11)

Response

1. Phones 4 U Ltd (Phones 4 U) said the discrepancy between the advertised price for the phone and the price on their website was due to the fact that this was a 'cashback' deal. They explained that this meant a customer would pay line rental of £35 per month up front, but could claim a rebate by sending in their bills and the relevant paperwork at three-monthly intervals for the first eighteen months. They said this would effectively take the rental rate down to the advertised price of £17.50 per month. Phones 4 U argued that it was common practice in the industry to advertise 'cashback' deals with the headline rate, which was the effective cost of the line rental after redemption of the discount.

Phones 4 U acknowledged that, in the case of this particular banner ad, the pricing policy was misleading. They explained that usually when advertising a headline rate they included an asterisk linked to text, which made it clear to the consumer that the price offered was by way of a redemption and that terms and conditions applied. They pointed out that space was limited in internet banner ads and that that was the reason for the omission of the relevant text in this instance. Phones 4 U said they had taken steps to ensure that headline rates would only be advertised in future where there was sufficient space to make the nature of the deal clear to the consumer.

2. Phones 4 U said they adopted the standard language and terms of the network provider when communicating 'unlimited texts' deals. They explained that the 'unlimited texts' offer was subject to a 'fair usage' policy that allowed customers to use 3000 text messages for free each month. Phones 4 U said that offer was called 'unlimited' because customers could still send around 100 text messages each day without being charged. They pointed out that the monthly allowance of 3000 text messages was higher than most customers used per year. Phones 4 U said their website did specify that 3000 text messages were included in the advertised offer, and that the terms and conditions included information on the network's 'fair usage' policy.

Assessment

1. Upheld

The ASA noted the advertised price of £17.50 a month was the effective cost of the line rental after customers had redeemed their discount. We also noted the nature of the 'cashback' rebate was normally explained to customers in terms and conditions linked to the ad, but that that link had been omitted by error. We acknowledged Phones 4 U's assurance that the discounted headline rate would only be used in future ads where there was sufficient space to make the nature of the deal clear to customers. Nevertheless, we considered that in order to receive the free Nokia N95 phone, customers had to commit to a direct debit payment of £35 a month for the life of the contract. We also considered that customers would have to pay £35 for at least the first three months of their contract before they were eligible to claim their first 'cashback' rebate. We understood that customers had to re-apply for their rebate every three months, and had to submit paper-work and copies of their bills each time. Because we considered the full costs of the monthly payments of the 'cashback' offer had not been made clear in the ads, we concluded that the claim "Free Nokia N95 Only £17.50 a month" in ads a and b was misleading.

On this point ads (a) and (b) breached CAP Code clause 7.1 (Truthfulness).

2. Not upheld

We noted the 'unlimited texts' offer was subject to a fair usage policy of 3000 texts per month, and that that was clearly explained in the terms and conditions. We considered that the fair usage policy represented a significant allowance of free texts, and that most customers would not be limited by it. We understood that the Phones 4 U website provided a number of tariffs for the Nokia N95 phone on behalf of the different mobile network providers. We recognised that customers on the website had to click through the various tariffs in order to find the one that suited them. We noted that the Nokia N95 phone was available for free on three separate tariffs. One tariff offered the Nokia N95 with 500 free texts a month and a different tariff offered the advertised deal of a free Nokia N95 with 500 free minutes and unlimited texts per month. Because the advertised deal was available, and because the fair usage policy relating to the 'unlimited' texts' would not restrict most customers, we concluded the ad was unlikely to mislead.

On this point we investigated ad (b) under CAP Code clause 7.1 (Truthfulness) but did not find it in breach.

Action

We told Phones 4 U to make sure that the full costs of the monthly payments were clear in future ads for 'cashback' offers.

Adjudication of the ASA Council (Non-broadcast)