Following a six month Ofcom investigation, Phones 4U were found responsible for various mis-selling practices including making mobile phone deal “chequeback” offers difficult to redeem. Katherine Seymour reports.
Topic: Consumer protection
Who: Phones 4U Limited ("Phones 4U")
When: May – November 2008
Law stated as at: 10 November 2008
Following a large number of consumer complaints about alleged mis-selling of mobile phone deals by Phones 4U, Ofcom launched a six month investigation to consider whether Phones 4U had engaged in conduct which infringed any relevant law and harmed the collective interests of consumers.
Phones 4U agreed to fully cooperate with Ofcom and react if required. Now Phones 4U has been found to have breached a number of consumer protection laws and as a result, has provided Ofcom with binding undertakings under Part 8 of the Enterprise Act 2002, thus committing Phones 4U to alter a number of their practices.
Five mobile phone providers, including Phones 4U, signed up to a voluntary industry code in July 2007 defining a best practice approach to the marketing and selling of mobile phones. The number of complaints to Ofcom increased across the board from 460 a month to 700 a month following the introduction of the industry code and in May 2008 Ofcom launched an investigation.
On 10 November 2008, Ofcom announced the results of the investigation. Phones 4U were found to have breached the following consumer legislation:
- Sale of Goods Act 1979 – restricting or excluding consumers' rights and remedies, including failing to repair handsets within a reasonable time and not providing the option to replace the handset;
- Unfair Contract Terms Act 1977 and the Unfair Consumer Contract Regulations 1999 – using terms in their handset return policy and "chequeback" policy that are contrary and unfair;
- Control of Misleading Advertising Regulations 1988 – making misleading, false or deceptive representations or omissions to consumers.
Under Part 8 of the Enterprise Act 2002, certain regulatory bodies including Ofcom, can enforce consumer protection legislation. Powers conferred on them include enforcement of undertakings provided to them by any offending party.
The undertakings given by Phones 4U include:
- changes to the Phones 4U handset return policy which have addressed the restrictions imposed on consumers in relation to rights and remedies available to consumers under the Sales of Goods Act 1979;
- changes to the "chequeback" terms and conditions which have addressed imbalances identified by Ofcom in the rights of consumers and the obligations of Phones 4U; and
- commitments from Phones 4U in relation to its sales practices, in particular, concerning the making of representations to consumers regarding network coverage, contract buy-out offers, mobile plan characteristics, "unlimited" internet usage, cancellation rights, and upgrades.
If these undertakings are breached, the Enterprise Act 2002 would enable Ofcom to apply to the High Court or County Court for an Enforcement Order, which if subsequently breached, would be considered a contempt of Court.
Despite mis-selling being a common complaint by the industry's consumers, Phones 4U was the first retailer to face an enquiry by Ofcom. The example made of Phones 4U will give caution to the rest of the industry's providers who may in turn review their own practices.