On 29 November 2023, Which? announced research showing that telecoms firms will generate £488 million from their next round of price increases in April. It is therefore timely that CAP’s new guidance on the advertising of telecoms contracts with mid-contract price increases comes into force on 15 December 2023. It sets stricter standards on the prominence advertisers must give to important information about future price rises.
The background to the changes is clauses in broadband and mobile contracts such as this example:
“The plan price will be increased on or after 1st March every year from March 2024 by the Consumer Price Index rate of inflation published in January of that year plus 3.9%.”
According to Which?, an estimated 13.7 million UK adults are currently in a mobile contract that allows for an inflation-linked mid-contract price rise in April 2024. As inflation is high, people are seeing significant price rises. Therefore, such clauses have been on the radar of both Ofcom, which is currently investigating them, and CAP and BCAP, which consulted on guidance to deal with advertising price rises in telecoms contracts.
The new guidance was published six months ahead of time to allow advertisers to update their materials. It includes several principles to help advertisers ensure that their advertising is not misleading. Ads are more likely to be compliant where:
- They do not state or imply that a price will apply for the full minimum term of the contract, if that is not the case – for example, claims such as “£X for X months” or “fixed for X months” are unlikely to be acceptable if the price is due to rise and any subsequent qualifying information is likely to contradict rather than clarify the claim;
- Price claims are qualified with equally prominent information alerting consumers to the presence or possibility of a mid-contract price increase;
- The details of what the increase will be based on are featured prominently relative to the price;
- Inflation terminology is presented in a way that is clear and simple to understand;
- They include the full amount the consumer will pay after the increase, once the relevant rate is known;
- They consider the time of year the ad is published relative to the timing of any price increase (usually in April) – for example, an ad is less likely to mislead if the monthly price stated in the ad will be charged at least once before the increase takes effect; and
- They make clear that terminating a variable contract due to a price increase will affect other linked services (for example, they may lose that linked service or incur a charge or other rice increase).
As mentioned above, Ofcom has been investigating this area as well. It is examining whether inflation-linked, mid-contract price rises give phone and broadband customers sufficient certainty and clarity about what they can expect to pay. Ofcom says that it is concerned about the degree of uncertainty consumers face about future price rises specified in contracts on the basis of inflation. Ofcom changed its rules in June 2022 to say that providers who specify price rises in contracts must make this clear before customers sign up and launched a related enforcement programme in December 2022.