Information about the PhonePayPlus consultation on new regulations for premium-rate services and a recent EU survey of websites offering mobile ringtones and wallpaper services is brought to us by Anna Montes.
Topic: Mobile marketing
Who: PhonepayPlus and European Commission
When: July 2008
Where: United Kingdom
Law stated as at: 28 August 2008
Companies selling ringtones, wallpapers and premium-rate mobile services have come under intense scrutiny in recent months. These services are currently under the watchful eye of both PhonepayPlus and the European Commission so the mobile industry is on stand-by for possible new regulation designed to improve consumer confidence in the sector.
1. PhonepayPlus consultation
PhonepayPlus, the premium-rate services regulator, has published a consultation on a range of measures which it hopes will tackle some existing problems with mobile premium-rate services. PhonepayPlus has become concerned with the state of the industry due to an increase of 108% in the number of complaints received this year. In 2007/08 it received more than 8,000 mobile-related complaints, leading it already to launch a review of premium rate mobile content back in May 2008.
PhonepayPlus has revealed how the complaints it receives generally fall under one of the following headings:
(a) Promotional SMS messages – Consumers argue that they often receive messages which carry an immediate charge when they have not consented to receive such a message. Alternatively, sometimes the message directs the consumer to a mobile website where they are then charged without their consent. These messages will often not carry adequate opt-out information.
(b) Marketing lists – Many of the complaints received by PhonepayPlus arise from the use of an opt-in list of consumers' mobile phone numbers. PhonepayPlus believes that in some cases consumers' details have been sold to third parties without the express consent of the data subjects, or where consumers did consent to receive marketing material in the past, that consent was given quite some time ago, meaning the consumers may have forgotten they previously gave their consent or have since lost interest in the goods or services being advertised. PhonepayPlus has therefore queried how long an opt-in should be considered valid in this context.
(c) Lack of transparency – PhonepayPlus has identified a grave lack of transparency within the premium-rate mobile content market, including widespread failure to provide adequate pricing information to consumers. PhonepayPlus also has concerns over phone-paid services that charge per page of a website that a consumer views.
(d) Subscription services, joining fees and failure to acknowledge the STOP command – PhonepayPlus has revealed that the provision of ringtones, wallpaper and music downloads using a subscription charge or joining fees are the biggest cause of complaint. It has revealed that in some cases consumers are unable to instantly stop any charge or messaging by texting "STOP" to the service provider. In other cases the service provider has been known to reply to the "STOP" instruction with a further message that misleads the consumer into texting back and rejoining the service.
2. Investigation into websites offering mobile ringtones and wallpapers
The national authorities of the 27 European Union member states have carried out an investigation of websites selling mobile ringtones and wallpapers. Norway and Iceland also participated with this project, the aim of which was to see whether such websites comply with all applicable European consumer legislation. Between 2 – 6 June 2008, 558 websites offering such mobile products and services were audited to see whether missing or incomplete pricing information was given, whether adequate trader details were provided and whether they featured any misleading advertising. Shockingly, 80% of all websites audited were found to have some "irregularities" and needed to be further investigated for suspected breaches of EU consumer legislation.
Some of these "irregularities" included:
- providing unclear pricing information or prices which did not include taxes;
- supplying misleading information which meant that consumers were unaware that they are signing up to a subscription based service;
- key information being hidden in very small print on the website or being buried on pages of the website which are not sufficiently prominent to consumers; or
- the word "free" being used in a misleading manner causing consumers to unwittingly enter into long-term contracts.
Almost 50% of all the websites reviewed had some irregularity relating to the information provided to consumers relating to the price of offers available. In many cases charges and fees were not clearly indicated or referred to at all (or rather that is, until the consumer is later invoiced via their phone bill!). Where subscription services were concerned, the lessons from The Crazy Frog subscription service offerings were clearly not being learned by other service providers as some websites offering subscription services did not even mention the word "subscription" or make the period of the subscription clear. Finally, the results of the website audit exercise also suggested that over 60% of websites presented their information to consumers in a misleading way with information on applicable contract terms being hidden in small print or hard to locate.
Those companies that failed the audit will be contacted by the relevant national authorities and asked to clarify or correct the problems identified. Their failure to rectify any breaches of consumer legalisation could lead to further legal action being taken against them. In the case of companies that operate cross-border, national authorities have agreed to work with colleagues from other EU authorities to ensure that such breaches are adequately dealt with regardless of jurisdiction issues.
Why this matters:
As part of its consultation exercise, PhonepayPlus has invited the mobile sector to voice its comments on the following suggestions before 11 September 2008:
(a) PhonepayPlus has drafted a Statement of Expectation which sets out how it expects to apply its Code in the context of specific service types and/or their promotion;
(b) it proposes to work more closely with the Information Commissioner's Office ("ICO") and to create a new Help Note with ICO to address transparency issues and the use of marketing lists in the context of premium-rate mobile services; and
(c) service providers who provide ringtones, wallpaper or music downloads using subscription charges or joining fees will have to seek prior permission from PhonepayPlus in order to operate such a business. The conditions of prior permission will include a requirement for services to seek confirmation from the consumer before they are charged, meaning that once a consumer has selected a download, they will be provided with information about the service selected and asked to confirm they are happy to proceed.
Separate to the consultation which is currently underway, PhonepayPlus is also issuing a Notice confirming that any service that does not respond to consumers sending a "STOP" command to unsubscribe from a service will be subject to an "emergency procedure" investigation immediately (as provided for under section 8.6 of the PhonepayPlus Code of Conduct). The service concerned will be prevented from operating further until this investigation has been completed.
So far as the results of the European-wide website audit are concerned, the Commission has given a very clear message to the industry – be on your guard! In public statements the Commission has warned consumers (particularly children and the teenage market) to check the small print of websites they use and make sure they are not signing up for more than they intended. Norway, Finland, Sweden, Latvia, Iceland, Romania and Greece are going one step further and intend to name and shame the guilty companies they identified by publishing the details of the websites found to have irregularities with consumer protection legislation.
The spotlight is on the mobile subscription services sector yet again and the players within this field would do well to take note. If consumer confidence in the mobile sector is to improve, content providers need to be more transparent and ensure consumers rights are honoured to ensure the stable growth of the sector.