Recent investigations into the advertising practices of BT, EE, PlusNet, TalkTalk, O2 and Virgin Media have raised significant concerns regarding how companies communicate mid contract price increases.
On 9 October 2024, the Advertising Standards Authority (ASA) took action by banning advertisements from six major communications companies, due to their failure to provide clear and transparent pricing information regarding mid-contract price increases. The ads were deemed to be misleading under the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code), for promoting headline prices without adequately disclosing the implication of potential price hikes.
What happened?
BT’s advertisement for its “Ultrafast Full Fibre 100” package displayed a monthly price of £29.99, but included a crucial detail about a £3 annual increase in much smaller text, which could easily have been overlooked.
EE’s advertisement for “Ultra Reliable Broadband” displayed a monthly price of £29.99 a month but, similarly to BT, the £3 annual price increase was written in smaller text below a postcode availability checker.
Plusnet promoted its “cash saving full fibre full fibre broadband” starting at £24.99 a month, however, information regarding annual increases tied to the Consumer Price Index plus 3.9% was presented in a smaller text and away from the main price claims, making it less visible.
TalkTalk featured various broadband packages with prices listed as “£28 a month until April 2025*”. While it included information about future price increases, this detail was placed in a subheading and not prominently displayed.
O2 described three data plans for the iPhone 15, stating that the monthly price would increase by the Retail Price Index rate of inflation plus 3.9% from April 2025. Although this information was pinned at the top of the webpage, its visibility was compromised due to its white background which blended in with the rest of the page. The main body of the advert did not clearly state that prices would be subject to annual increases.
Virgin Media’s webpage outlined three “M250 Fibre” broadband packages stating that the monthly price would increase each April by the Retail Price Index rate of inflation plus 3.9% from April 2025. Although this information was displayed in a sticky banner at the top of the page, it was not immediately distinguishable due to blending into a white background. Further, the individual package listings did not clearly indicate that the prices would only apply until April 2025.
Upcoming regulations
From 17 January 2025, Ofcom will enforce new requirements for telecom providers, mandating that any in contract price rises be clearly specified in pounds and pence before a customer signs a new contract. Price increases tied to uncertain future inflation will be prohibited.
What is the wider impact on businesses?
These rulings are not just relevant for telecom providers but could impact any business that provides goods or services to consumers using a subscription model. Consumers are increasingly moving to “as a Service” pricing models that spread the costs of a product or a service out over the length of the contract. So any business that utilises mid-contract price increases will be affected.
What can we take away?
The above ads were deemed to be misleading under the CAP Code for promoting headline prices without adequately disclosing the implications of potential price increases. According to the CAP guidance, the existence and nature of mid-contract price increases are considered material information necessary for consumers to make informed decisions, and this information must be clearly and prominently displayed in order to avoid misleading customers.
In order to ensure that they are abiding by the CAP Code, businesses can take the following actions:
- Provide clarity on price increases. Simply stating when a price increase will occur is insufficient. Companies must clarify how these prices will change (and telecom providers in particular will need to provide specific figures, in order to comply with the upcoming regulations on this).
- Ensure that all qualifying information on price is in close proximity to the relevant information. If qualifying information is placed in a location that is away from the main information on price, or the main body of the advert, the ASA considers that it is likely to be overlooked.
- Ensure that information is displayed effectively. Price rise information should remain visible as users scroll down to view product packages. Using backgrounds that blend in with the colour of text diminishes its visibility. Important information should stand out to capture consumer attention.
- Undertake regular audits and staff training. Companies should conduct periodic reviews of their advertising practices to align with regulatory guidelines and train their marketing teams on the importance of clear communication.
If you need advice on how you should communicate mid contract price increases, speak to our specialist lawyers. Find out more about our consumer and trading standards services here.
