If you have a mobile or broadband contract, you may have noticed clauses such as the following in your contracts:
“The plan price will be increased on or after 1st March every year from March 2023 by the Consumer Price Index rate of inflation published in January of that year plus 3.9%.”
Rather than containing a fixed price, many contracts for mobile and broadband services now provide for price increases (usually linked to inflation) during the term of the contract. As the rate of inflation is currently very high, this can obviously result in significant price increases.
This has led to CAP and BCAP consulting on guidance that would require information about mid-contract prices to be more prominently stated in telecoms ads across media, to avoid misleading consumers.
The remit of the ASA is limited to the content of marketing communications. However, Ofcom rules set out statutory rules on contractual information and how it is communicated to consumers, which were updated in June 2022. The rules say that if the contract contains a price variation clause, the providers should set out an example estimate in the contract summary and contract information of how an inflation increase will affect the customer’s future monthly price. In addition, there are general consumer protection rules which provide that information given to consumers must be clear and not mislead them into taking a transactional decision that they otherwise wouldn’t have done.
Under the advertising codes, information about the presence or possibility of and, if known, the nature of any price rise is clearly material to consumers' decision-making and should be made sufficiently clear in advertising to avoid misleading them.
Telecoms contracts are often complex products, and there are a range of factors to consider in deciding what is likely to be a sufficiently prominent presentation of information about mid-contract price rises in ads for such services. A change to the advertised price during the term of the contract would be material information under any circumstances. However, with the current economic situation, rises in the cost of living mean that such increases are likely to have an even greater impact on consumers.
Therefore, CAP and BCAP are consulting on a set of principles that they consider are likely to help telecoms ads be more likely to comply with the Codes and less likely to mislead consumers in their presentation of information about mid-contract price increases.
The principles are:
- Information indicating the presence or possibility of a price rise is immediately adjacent to the initial price claim.
- The nature of the price rise is featured prominently within the main copy of the ad, where relevant.
- Descriptions of future price rises and terminology used are clear and simple to understand.
- Advertisers take care to distinguish the full contractual price that applies before the tiered increase from any other introductory discounts that may apply.
- Advertisers keep in mind the timing of publication relative to the publication of rates of inflation linked to annual price increases.
In 2021, the ASA Council closed two investigations looking into the presentation of mid-contract price increases in telecoms ads and referred the matter to CAP and BCAP for consultation. This was because they felt that there are limitations on the ability of individual rulings to address the implications of the various considerations involved and to ensure that information about mid-term price rises is delivered to consumers clearly and consistently in advertising. In addition, existing guidance is ambiguously worded in places and does not clearly align with the position taken in previous ASA rulings.
The guidance includes an appendix with worked examples of ads. Any guidance will be relevant for other sectors as well as telecoms, so it has wider implications than telecoms providers. In addition, although it is aimed at consumers, it will also be relevant for business-to-business marketing.
The consultation ends on 17 November.
Information about price increases during the term of the contract is always material to consumers’ transactional decisions, regardless of the broader economic environment. However, it is also relevant to acknowledge the wider context of the current cost of living situation.