Following an investigation into international calling card sales practices generally, Ofcom took enforcement action against ICC seller Nowtel over alleged breaches in its advertising of the Consumer Protection from Unfair Trading Regulations 2008. Judith Gordon reports the outcome.
Who: Ofcom and Nowtel
When: July 2011
Law stated as at: 30 August 2011
Following an investigation by Ofcom into potential breaches of consumer protection legislation, Nowtel has agreed to change the advertising of its phone cards by way of an undertaking.
Nowtel is one of many providers of international calling cards (“ICCs”) which allow users to make cheap overseas phone calls, and claims to be the largest producer of phone cards in Europe. The cards are popular with the UK immigrant population in particular and with more than 5 million adults in the UK using them at an average spend of approximately £13 per month, is an industry generating hundreds of millions of pounds every year.
Ofcom launched an investigation into Nowtel earlier this year following a crackdown on poor consumer experiences of ICCs generally. Ofcom research which took place in the summer of 2010, showed a great deal of confusion amongst consumers in relation to both the charges and terms and conditions of ICCs. Ofcom therefore launched a monitoring and enforcement programme into the advertisement and sale of ICCs and their compliance with relevant consumer protection law (the “ICC Programme”). The Nowtel investigation was launched as part of the ICC Programme.
The Nowtel investigation was opened on 7 March 2011 and closed on 28 July 2011, concluding that Nowtel’s advertisement of ICCs was likely to constitute misleading actions and omissions in potential contravention of the Consumer Protection from Unfair Trading Regulations 2008. Following a consultation with Ofcom, Nowtel are said to have brought such potential contraventions to an end and have cemented their commitment to no future breaches by way of an undertaking, pledging to make changes to its advertisements in the following ways:
- clearly stating to consumers the headline number of minutes that they will receive and that minutes are reduced by certain fees and/or charges in a manner which is clear, intelligible and unambiguous;
- providing consumers with material information in a manner which is clear, intelligible or unambiguous, including but not limited to, connection fees and maintenance charges; and
- ensuring that material information such as terms and conditions is displayed in a clearly legible font.
Nowtel have until 1 October 2011 to comply with the undertaking, which includes the requirement to replace existing advertising. Ofcom are said to be actively monitoring the company’s compliance.
Why this matters:
The result demonstrates Ofcom’s powers in relation to breaches of consumer protection laws within the communications industry and more particularly, their willingness to take action against marketers advertising their products in a misleading way. Marketers should therefore note that it is not just the Advertising Standards Authority who have the ability to censure misleading advertising.
Looking more particularly at the telecommunications industry however, other ICC providers should take note that Ofcom have extended the ICC Programme at least until the end of the year and will be looking out for other breaches of consumer protection legislation.