Premium rate line entry competitions were the subject of recent investigations by PhonepayPlus which in one case led to a record fine of £800,000. Rosanna Foster reports on the cases against Churchcastle Ltd, Amazecall Ltd and mBill Pty and the verdicts.
Topic: Telecoms
Who: PhonepayPlus, Churchcastle Ltd, Amazecall Ltd and mBill Pty
Where: London
When: 11 October 2012
Law stated as at: 31 October 2012
What happened:
PhonepayPlus, the body responsible for regulating premium rate service in the UK, has imposed fines amounting to £1.25 million in relation to misleading competitions run by Churchcastle Ltd ("Churchcastle"), and misleading promotions on Facebook by Amazecell Ltd ("Amazecell") and mBill Pty ("mBill").
Churchcastle – word search competitions leading to large phone bills
Word search competitions run by Churchcastle were featured in around 50 publications, including some major national newspapers.
On completing the word search puzzle, consumers identified the missing word(s) and called a premium rate number to submit the answer via an automated service. A pre-recorded message would play to consumers but it did not contain pricing information, just a direction to see the "notice sheet". Having entered the word search competition and provided their contact details, consumers were sent direct mail marketing encouraging them to continue to engage with additional stages of the competition or a new competition.
The direct marketing took a variety of forms, including that of a letter which appeared to be handwritten and an Easter card which gave the entrant the impression that they were part of a select group close to winning. The prizes offered included low quality jewellery.
PhonepayPlus received 15 complaints from concerned relatives of elderly consumers, many of whom had incurred large telephone bills. The PhonepayPlus Tribunal (the "Tribunal") found that there had been three very serious breaches of the PhonepayPlus Code of Conduct (the "Code") as follows:
1. Rule 2.3.10 – "Premium rate services must not seek to take advantage of any vulnerable group or any vulnerability caused to consumers by their personal circumstances"
While Churchcastle denied targeting the elderly, the Tribunal decided that the competitions it had run were either promoted and/ or particularly attractive to the elderly. Among the pieces of evidence considered in coming to this conclusion were the winners' testimonials provided by Churchcastle, the majority of which came from elderly consumers, the personal nature of the direct marketing promotions, the style of the jewellery offered and the fact that the complaints received all involved elderly people. Despite the significant number of elderly consumers, the promotions were done in such a way that elderly people "were likely not to be aware of the cost of entering the secondary promotion competitions", for example the price was in very small font, inappropriate for elderly consumers, who often have sight problems.
2. Rule 2.2.5 – "In the course of any promotion of a premium rate service, written or spoken or in any medium, the cost must be included before any purchase is made and must be prominent, clearly legible, visible and proximate to the premium rate telephone number, shortcode or other means of access to the service".
The Tribunal noted an example of the wording used in pricing information within the print promotions – "Calls cost £1.53 per minute" – which it considered to be insufficiently detailed.
In addition, the pricing information in the direct mail marketing promotions was provided within the lengthy terms and conditions, in capital letters but in small font. The Tribunal found this was "not prominent, visible or proximate to the premium rate telephone number" as it should have been.
3. Rule 2.3.2 – "Premium rate services must not mislead or be likely to mislead in any way"
The promotions had described that the jewellery prizes in ways that suggested that it was "limited" and "rare". The Tribunal, having inspected three of the jewellery items, decided that the quality had been misrepresented. Customers had been misled and decisions to continue with the competition may have been different had they been aware of the items' true quality.
All the word search promotions created a sense of urgency, for example by including the words "IMMEDIATE DEADLINE" in a stamp styled font, misleading customers into acting more quickly than was necessary where in reality concerned that they may miss out.
The contents of the direct mail congratulatory letters were also misleading, containing complex terms and conditions and confusing references to the prizes on offer.
The Tribunal also found that Churchcastle had not provided requested information to PhonepayPlus on two occasions, which constituted a breach of Paragraph 4.2.4 regarding the falsifying or concealment of information supplied to PhonepayPlus.
Churchcastle was fined a record £800,000. Paul Whiteing, Chief Executive of PhonepayPlus said the organisation will "not tolerate any misleading activity that takes advantage of vulnerable people".
Amazecell – trivia question texts with a minimum charge of £10
The Amazecell Trivia service consisted of up to six trivia questions. Consumers were charged £5 for messages containing questions. They were not charged for answering the questions, but each answer triggered the sending of a further message, until all questions had been sent and £30 had been spent by the consumer. Eight games were run concurrently, each having a different landing page on the Amazecell website.
Complaints were received from consumers who had been directed to an Amazecell landing page by misleading promotions on websites including Facebook. Some complained of misleading content being automatically posted to their Facebook "walls" without their knowledge, while others were encouraged to "share" the promotion on Facebook to be able to participate.
The Tribunal found that there had been three very serious breaches of the Code:
1. Rule 2.2.5 – "In the course of any promotion of a premium rate service, written or spoken or in any medium, the cost must be included before any purchase is made and must be prominent, clearly legible, visible and proximate to the premium rate telephone number, shortcode or other means of access to the service".
Contrary to PhonepayPlus guidance, pricing information on a number of the landing pages was presented in small font and coloured grey, making it difficult to see.
The use of an "Inline Frame" or "I-Frame" which obscured the landing page was of concern to the Tribunal, as it meant the consumer could not see any of the pricing information at all. Amazecell accepted that the use of the I-Frame, which was generated by one of its affiliate marketers, was contrary to both Rule 2.2.5 and its own terms and conditions.
2. Rule 2.3.1 – "Consumers of premium rate services must be treated fairly and equitably"
The landing pages stated "Costs £5 per question. This is NOT A SUBSCRIPTION SERVICE. Every correct answer gives you one entry for the chance to win. Min age 18". While this suggested that a consumer could answer just one question and be charged £5, in fact, given that each answer triggered another question, the minimum charge was £10. The Tribunal found that in not making this clear, Amazecell had not treated consumers fairly and equitably.
3. Rule 2.3.2 – "Premium rate services must not mislead or be likely to mislead in any way"
The Facebook promotions provided by Amazecell's affiliate marketers were found to be "clearly misleading". In some cases, consumers were encourage to share the promotion on their wall and then to complete a survey to claim an offer. Having clicked on the survey, consumers were redirected to a landing page which contained no details of the initial offer and asked to enter a mobile number. So consumers had inadvertently engaged with the service, having expected to claim the initial offer.
In addition, the use of the I-Frame "resulted in an intentionally misleading landing page".
Amazecell was fined £300,000.
mBill – prizeKing service promoted heavily on Facebook
mBill operated the prizeKing service which offered a number of play options including a subscription service which cost £4.50 per week and non-subscription services which cost either £9 or £18. The former gave consumers access to quizzes, as well as video and wallpaper content on mBill's website, while the latter gave consumer the chance to enter a weekly "Click2Win" competition. PhonepayPlus received 54 complaints in relation to these services, the majority of which stated that the text messages received were unsolicited. mBill or its affiliate marketers promoted the prizeKing service on Facebook, using pop-ups, surveys or by offering the chance to claim free products.
The Tribunal found that there had been various breaches of the Code:
1. Rule 4.2.5 – "A party must not fail to disclose to PhonepayPlus when required any information that is reasonably likely to have a regulatory benefit in an investigation".
The Tribunal found that mBill had not made a sufficient effort to provide the information on its affiliate marketers which had been requested by PhonepayPlus, preventing it from establishing how the prizeKing service was promoted. The Tribunal was not persuaded by mBill's argument that it was unable to obtain such information.
2. Rule 2.3.1 – "Consumers of premium rate services must be treated fairly and equitably"
A breach was upheld in relation to the lengthy terms of the subscription service which were unclear, and the Click2Win competition which did not take place every month despite the suggestion to consumers that it did.
3. Rule 2.3.2 – "Premium rate services must mislead or be likely to mislead in any way".
There was a discrepancy between the actual prize and prize communicated in messages which the Tribunal considered misleading or likely to be misleading.
4. Rule 2.3.3 – "Consumers must not be charged for premium rate services without their consent. Level 2 providers must be able to provide evidence which establishes consent".
It was found that mBill was unable to provide robust verification of consumers' consent to charge, and without evidence to the contrary, the Tribunal concluded that it did not have consent to charge. It was noted that a breach of Rule 2.3.3 was considered amongst the most serious of all breaches under the Code.
mBill was fined £150,000. Paul Whiteing commented that the judgements in the Amazecell and mBill cases "made clear that misleading behaviours…will attract sizeable penalties".
Why this matters:
The fines handed out in these cases indicate how seriously PhonepayPlus takes blatant breaches of its Code and its willingness to take decisive action and hand out significant fines to punish breaches and deter other operators from making the same mistakes.
From a reading of the adjudications it is clear that premium rate line operators must prioritise making consumers aware that they will be charged for using services and providing clear information on how much they will be charged. The use of I-Frames should be avoided if there is any question that they might obscure such information.
The Churchcastle case highlights the importance of considering who the service consumers are likely to be and what additional needs and difficulties they may have. Taking advantage of vulnerable consumers can result in severe treatment by regulators and will cause serious public relations issues.
The use of social media which misled consumers in the Amazecell and mBill cases should make operators think very carefully about how users might be led from social media sites to ultimately signing up to their services, and whether consumers understand what they are doing at each stage.
Paul Whiteing said in response to the Amazecell and mBill cases, that the Code is "clear about premium rate service providers' responsibilities and this includes the way in which their services are promoted". Operators must therefore be aware of the activities of affiliate marketers, and be confident that they comply with the Code.
