Background
The ASA understood that Ofcom had published guidance on mid-contract price rises, which came into effect on 23 January 2014. The guidance covered the way in which the telecommunications sector rules on changes in contract terms applied to price rises. It made clear that if a communications provider wanted to increase the monthly core subscription price (or prices) agreed by the customer at the point of sale, Ofcom was likely to regard it as a materially detrimental contract change requiring the customer to be given at least one month's written notice of the increase and the right to terminate their contract without penalty. The guidance made clear that the importance of the core subscription price in the subscriber's choice of contract meant it should be clear to the subscriber before entering into any contract what the price offered and agreed was. It said the subscriber should be able to compare offers, make informed decisions and rely on the price agreed. Whilst we noted the guidance, we assessed whether the ad breached the CAP Code.
Ad description
Claims on www.virginmedia.com, on two pages promoted broadband packages.
Text on one page stated, "uSwitch exclusive offer - £50 reward on Big Connection with superfast up to 50Mb broadband and calls ... Just £4 a month for 6 months then £17.50 a month + Virgin Phone line (£16.99 a month) ... 12 month contract". Text on another page stated, "Big Bang - £25 a month for 12 months then £32 a month - includes Netflix for 6 months ... FREE set-up online only + Virgin Phone line for £16.99 a month".
Issue
Two complainants, who, during the minimum term of the contract, had been told their monthly charges would be increased, challenged whether the price claims were misleading.
Response
Virgin Media Ltd said that, at the time a customer signed up to a 12- or 18-month contract, they made the promotional price and subsequent standard price clear. They said they might increase prices such as line rental occasionally which would affect the majority of customers, including those who had signed up for a 12- or 18-month contract. They said they did not know if, when, or by how much a customer's core price might rise at the start of the contract. Therefore, they were unable to advertise the future price.
Virgin believed that the Ofcom guidance did not prevent them from implementing a price rise during the minimum term at a date or by an amount that had not been fixed at the outset, but that it simply confirmed that Ofcom was likely to treat any price rise during the minimum term as materially detrimental and as such, the customer should be given appropriate notice of that price rise and be advised that they were entitled to exit their contract without penalty.
Virgin said they advertised new increased prices around two months before they were implemented; for example, a customer buying services in December might sign up on the basis of those increased prices, although those prices wouldn't take effect until January. Further, they said where they offered a promotional rate, for example, of £10 for the first 12 months and £20 thereafter, if a price rise occurred in the first 12 months, the promotional price would not be increased. They said the price rise only affected their standard prices, not promotional ones.
Assessment
Upheld
The ASA understood that there were three main types of contract relating to telecommunications packages: 'fixed', 'tiered' and 'variable'. In a fixed contract, consumers paid one fixed price throughout the contract period. In a tiered contract, consumers agreed to pay different prices at different times. In a variable contract, consumers agreed to pay a core subscription price for the fixed term of the contract (notwithstanding any 'special introductory prices'), but the provider reserved the right to increase the price at its discretion.
We understood that the contracts offered in this case were variable ones which included a special introductory price period.
We considered that consumers would understand that the price of a telecommunications package was fixed during the minimum term of the contract, unless it was made clear to them that this was not the case. We considered that consumers would interpret the claims in the ad to mean that the monthly prices would not rise beyond those stated for both the promotional and standard periods of the minimum term. For example, the first package stated, "Just £4 a month for 6 months then £17.50 a month + Virgin Phone line (£16.99 a month) 12 month contract". We considered that consumers would understand from that that the line rental cost would be fixed at £16.99 for the duration of the contract, and that the broadband cost would be fixed at £4 for six months, and then £17.50 for the remainder of the contract.
However, we understood that, because the contracts were variable, the price was not fixed, and could be increased at Virgin's discretion. Both complainants were subsequently told that the price would increase by £3 before the end of the minimum term.
We considered that the monthly price of a contract was likely to be material to consumers when deciding on a telecommunications package, and that they might not choose a particular package if they knew that the monthly cost could increase beyond the amounts stated in the ad, during the minimum term. Therefore, we considered that the price claim should have been immediately qualified to explain to consumers that it was not fixed throughout the minimum term, and that the contract was a variable one in which the price could rise.
Because subsequent price rises meant the advertised price claims for the packages did not represent the prices that consumers would pay throughout the minimum term of the contract, across both the promotional and standard periods, and because it was not made clear that the contract was a variable one in which prices could increase, we concluded that the ad was misleading.
The ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising),
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
(Qualification), and
3.17
3.17
Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product featured in the marketing communication.
(Prices).
Action
The ad must not appear again in its current form. We told Virgin Media Ltd to ensure that they stated clearly and prominently where a telecommunications contract was variable. We also told them not to suggest that a price would be fixed for the minimum term of the contract, or for a certain period of time, if that was not the case.
