Background
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
Claims on the website www.neopost.co.uk promoted a mail franking machine. A page entitled "MORE MAIL FOR YOUR MONEY" featured a bullet-point list that stated "Expect lower-cost ... mail ... Say no to stamps - and save up to 33%". Further text on the same page stated "In March 2015, Royal Mail is raising the cost of posting - again. But with a smart new franking machine from Neopost you could actually slash your current business postage costs and save up to 33%* - potentially saving you hundreds of pounds a year". Text in bold repeated the claim "Save up to 33%". At the bottom of the page, smaller text stated "*33% saving is based on 2015 postage cost of a standard second-class letter using a stamp versus MailMark franking". The page also featured a link labelled "Calculate your savings over stamps: Use our quick online calculator".
The online calculator allowed the user to select the type, class, quantity and weight of packages sent through the mail. The resultant output quoted the respective costs of "Using Stamps" and "Using Franking" and stated "Look, franked mail is cheaper! That's x% Less! Annual Savings: £y".
Issue
The complainant, who understood that the savings claims did not include ongoing costs associated with using franked mail and that Royal Mail was raising the cost of franked as well as stamped mail, challenged whether:
1. the savings claims were misleading and could be substantiated; and
2. the claim "In March 2015, Royal Mail is raising the cost of posting - again. But with a smart new franking machine from Neopost you could actually slash your current business postage costs ..." was misleading.
Response
1. Neopost Ltd explained that the postage cost of mailing was cheaper with franking than with using stamps and that franking machine users had benefited from postage discounts for ten years. They said the 33% savings quoted in the ad specifically referred to savings on postage, in particular the cost of sending a small letter second-class using a franking machine versus a second-class stamp. It was not based on the total cost to a company of running its posting facility. They said that due to the price difference between stamps and franking across a wide range of items, the postage savings could be substantiated easily. They provided a spreadsheet comparing stamps and franking postage costs for popular mail items, which illustrated that discounts of up to 33% were available. They believed it was reasonable to advertise the most favourable saving that could be made, particularly as the claim was qualified twice; first by the use of the phrase "up to" and second by the footnote explaining the basis of the comparison.
They acknowledged that there were costs associated with acquiring and running a franking machine that had not been referred to in the ad. They said it had become industry practice for suppliers and dealers to separate the variable aspects of using a franking machine, such as leasing and ink cartridge costs, and focus on promoting the demonstrable price differences between stamps and franking. They provided some examples of similar ads. They said their approach was consistent with industry custom and practice.
Neopost said that in view of the long-established and widespread use of franking machines, it was reasonable to assume that potential customers would be aware that franking incurred some additional costs. They provided examples of marketing materials from manufacturers, comparison websites and other suppliers which quoted similar savings, without referring to the associated costs. They said it was normal in business advertising to promote efficiencies without spelling out the need for capital costs.
They said that because of the variability of the costs of using franking machines versus stamps, it was not possible to provide a generally applicable total cost comparison that included postage and the time savings that could be made from improved efficiency in relation to mail processing. They said that franking was a scalable solution and that as volume increased, operating costs declined as a percentage of the postage cost saving. To demonstrate this, they provided a spreadsheet comparing the postage plus operating costs of their IS-5000 franking machine versus the cost of using stamps to send the same volume of mail. They said that many of the costs and benefits of franking were also customer-specific. For example, high volume users could access Royal Mail Business Mail Advance volume related discounts, and businesses that used VAT-liable Royal Mail services could reclaim VAT.
Neopost also pointed out that the ad invited potential customers to contact a sales adviser, who would then take the time to understand the customer requirements, identify the correct machine, explain the relevant offer and respond to any questions regarding operating costs. They said their aim in the process was to be transparent.
They explained that they offered seven franking machines and a variety of purchase options, including outright purchase, rental and various lease terms. They acknowledged that the ad did not specify a particular model as it was intended to create interest in franking amongst stamp users who would typically have low volume requirements, and enquiries were directed to an acquisitions sales team that dealt solely with that type of customer. They explained that the team sold a limited range of machines – in particular, the 'Autostamp' (or IS-280), IS-350 and IS-420, although the vast majority of sales were for the Autostamp package. They provided information regarding the monthly leasing costs for each of the three machines and the cost of replacement ink cartridges (although they noted that the first cartridge was supplied at no extra charge). They also provided information regarding the average monthly mail volumes for each type of machine, as well as information regarding ink usage and the likely lifespan of an ink cartridge.
Neopost said the complaint should be viewed in the context of very high volumes of marketing communications sent by them and their competitors, and they believed the fact that only one complaint was received indicated that there was no general feeling amongst business consumers that their ad was misleading.
2. Neopost acknowledged that Royal Mail had applied a price increase to both franking and stamps. They did not believe the claim was misleading and pointed out that it did not mention stamp prices. They believed it was factually correct to state "Royal Mail is increasing the cost of posting" and they had scheduled the ad at the time of the Royal Mail announcement to make business users aware of the cost differential between stamps and franking at a time of generally increasing postal costs.
Assessment
1. Upheld
The ASA noted that the savings claim was intended to be on a per letter basis, comparing only the postage cost of sending a standard second-class letter using MailMark franking versus a stamp, and that this was an established industry approach. We understood that the ad was aimed at businesses that were using stamps rather than at existing franking machine users.
We considered the data provided regarding leasing and ink costs, and average mail volumes of existing customers. We calculated that a customer sending an average number of letters using the Autostamp (or IS-280) or the next machine up, the IS-350 (the machines that accounted for the vast majority of sales), would not be able to achieve a 33% saving compared to using postage stamps when the monthly leasing costs of the machines were factored in. We noted that customers would also have ongoing ink costs.
We acknowledged that the associated costs of using a franking machine were variable and there were several purchase options. However, we noted that the ad made no mention of those costs and considered that the context in which the claims were presented did not make it sufficiently clear that the savings were on a per letter basis, for example where the ad stated "slash your current business postage costs", "potentially saving you hundreds of pounds a year" and "Look, franked mail is cheaper! That's x% Less! Annual Savings: £y". Although the savings claim was linked to a footnote explaining the basis of the comparison, we considered it contradicted the overall impression of the ad which was that the savings quoted were on postage costs generally. Furthermore, we considered the associated costs of using a franking machine constituted material information that had been omitted from the ad and we would expect such information to be stated prominently in the body of the ad. For those reasons, we concluded that the savings claim had not been substantiated and was therefore misleading.
On this point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
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.
and
3.4.3
3.4.3
the price of the advertised product, including taxes, or, if the nature of the product is such that the price cannot be calculated in advance, the manner in which the price is calculated
(Misleading advertising),
3.7
3.7
Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation.
(Substantiation),
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
3.33
3.33
Marketing communications that include a comparison with an identifiable competitor must not mislead, or be likely to mislead, the consumer about either the advertised product or the competing product.
(Comparisons with identifiable competitors).
2. Upheld
We noted that the claim referred to Royal Mail raising the cost of posting and did not specifically mention stamps. We also noted that the claim then referred to slashing business postage costs by using a franking machine. We considered that the audience was likely to infer from the claim that Royal Mail was only increasing the price of stamps and that consumers could avoid those increases in postage costs by purchasing a franking machine. We therefore concluded that the claim was misleading.
On this point, the ad breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising) and 3.7 3.7 Before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove claims that consumers are likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation).
Action
The ad must not appear again in its current form. We told Neopost Ltd to ensure future ads comparing the postage costs of stamps versus franking included material information about the leasing and other associated costs of using a franking machine. We also told them to ensure that claims about rising postage costs did not mislead.
