Who: PhonepayPlus (PPP)
Where: UK
When: 17 August 2016
Law stated as at: 1 September 2016
What happened:
PPP, the UK regulator of premium rate services (PRS) is proposing additional regulatory requirements for both online competition services and online adult PRS which would take the form of ‘Special conditions’. Such Special conditions are applied to certain types of PRS where PPP is satisfied, after a public consultation that there is an increased potential for consumer risk, harm or offence with that particular PRS. This means each Special conditions regime in existence is unique to the risks presented by the PRS. A breach of a Special condition will be a breach of the PPP Code of Practice. PPP has now identified the potential for consumer harm from online competition services and online adult PRS and wants to address these risks. In this article we consider the risks and regulations identified for online competition services.
What are online competition services?
‘Online competition services’ in this context are PRS that are provided fully or partially online, including services that initiate a PRS transaction online, where: (a) the primary promotion is online and presents a consumer with a chance to win a prize by competing with other entrants and (b) this is paid for on a pay to enter or subscription basis. Examples of such competition services include online lotteries, other online games with prizes and promotions which include an entry mechanism into a draw and information about prizes and how to claim them. Furthermore, ‘online’ in this context refers to those services consumed on personal computers or mobile devices whether accessed via a Wi-Fi connection or directly through mobile internet (2G, 3G, 4G, etc). If the consumer is given the choice to consume the digital products or services online or to download them for offline use, PPP would still expect the service to comply with its proposed Special conditions.
What are PPP’s concerns with these services?
PPP explains that the reason it has launched this public consultation regarding online competition services is because it receives “disproportionately high complaint numbers” regarding online competitions. During the 2015/16 financial year, 5,482 complaints were received – 90% of which involved consumers saying they had not requested the services they were subscribed to. Independent consumer journey research commissioned by PPP highlighted serious concerns with such services including the following:
- the possibility for consumers to easily provide unintentional consent to an online competition;
- opt in and opt out mechanisms associated with such competitions considered to be insufficiently robust or transparent from a consumer perspective; and
- in relation to subscription online competition services, the possibility that consumers can remain unaware that consent to recurring charges has been given.
What changes have been proposed?
The draft Special conditions proposed by PPP include the following examples:
1. With an online competition service, the point of purchase must be separated from general service interaction, including its promotion in a clear and effective way which allows the consumer to consider their purchase. At this point of purchase, PRS providers must:
- clearly signpost the point of purchase by making it distinctive from other aspects of the service (such as by using a different design and colour scheme) and take all reasonable steps to make that distinction “abundantly clear” to avoid any confusion between general service promotion and the actual point of purchase;
- ensure that, when committing to a purchase, consumers explicitly acknowledge that the purchase implies an obligation to pay;
- ensure that consumers are made aware, in a clear and prominent manner and directly before the consumer commits to a purchase, of the cost of the service and the frequency of charges; and
- expressly indicate that the PRS payment will be added to the consumers phone account.
2. At the point of each purchase and prior to delivering the PRS charge, including any initial charge of a subscription service, providers are required to obtain consent to charge from the consumer in the form of a “positive, recorded and auditable response” which also involves the costs and name of the premium rate service being clearly presented to the consumer.
3. Where promotional materials are concerned, PRS providers must clearly identify the brand of the current service offered to and used by the consumer – this may be achieved by “prominent brand management and display” which may include requiring consumers to become account holders of the branded service and signing in prior to entering individual competitions.
4. PRS providers must establish effective opt-out processes for subscription services by using one of the dedicated protocols stated by PPP in the Special conditions, dependent on billing mechanism used by the PRS provider:
5. Where embedded links within PRS messages are used to form part of any opt-out process, the Level 2 provider (or relevant intermediary operating a centralised opt-out process) must:
(a) establish a dedicated webpage to deal with only: (i) method of exit; (ii) data protection; and (iii) privacy requirements; and
(b) provide a link to the dedicated web page in receipts and billing period reminders – such links must not be provided less than once per month in frequency.
PPP believes these new requirements will address its particular concerns with online competition services. These requirements were discussed by PPP with an industry working group prior to the current formal consultation and they can be read in detail as part of the consultation in the Special conditions for online competition and online adult premium rate services consultation document.
Why this matters:
The deadline for responses to this consultation is 12 October 2016 and PPP has indicated that it aims to react quickly after this closing date. It has indicated it will publish a final statement on the outcome of this consultation within six weeks of the closing date, so any interested parties should get involved with this process soon. The number of complaints PPP receives in this area means that it wants to respond quickly to reinstate some consumer confidence in this area and with PRS more generally. In addition to the proposals set out in this consultation, PPP have therefore also indicated they will be seeking to explore additional measures to improve consumer confidence in high-risk subscription services by offering upfront solutions for redress – with refunds to affected consumers via their network operators being one possible option. In light of this increased regulatory focus, PRS providers would be well-advised to review their compliance in these areas.
