Ofcom recently investigated price claims in prepaid calling card ads. It found cause for concern in this growing market and we report on the undertakings extracted from three operators and what Ofcom wants to see from advertisers in future.
Topic: Telecommunications
Who: Ofcom and Vectone Group Holdings, Calling Card Company (UK) Limited and Primus Telecommunications Limited
Where: London
When: October 2004
What happened:
Ofcom completed an investigation into the sale of pre-paid calling cards. These offer consumers an alternative way of making international calls to a variety of destinations. They are generally sold in denominations of £5, £10, and £20.
Ofcom research indicated that around 8% of the adult population in the UK used these cards (around 3.7 million adults) with the average spend amongst regular users being £10 per month. There are over 50 different providers of these cards with around 150 million of them sold each year.
Ofcom became involved after complaints were raised by consumers about potential discrepancies between the charges advertised and the actual call charges levied.
Ofcom findings
Ofcom found that many of the potential discrepancies in the charges were due to a "lack of clarity" in the advertisements as to the terms and conditions of use, contrary to the Control of Misleading Advertisements Regulations 1988 and the Unfair Terms in Consumer Contracts Regulations 1999.
Ofcom was particularly concerned that a number of ads failed to make clear all the charges that applied to the use of the cards, particularly as regards when connection and maintenance charges were incurred and the level of those charges.
Many ads also failed to make clear the main terms and conditions that applied to the use of the cards and where full details of those terms including prices could be obtained. This frequently led to consumers purchasing calling cards without being fully aware of the terms that applied.
Suppliers give undertakings
During the Ofcom investigation, Vectone Group Holdings, Calling Card Company (UK) Limited and Primus Telecommunications Limited all agreed to sign undertakings which committed them to re-advertising the prices and contract details for their calling cards and taking steps to improve the availability of their terms and conditions.
In future, Ofcom will seek to ensure that consumers have access to full details for pre-paid calling card charges before they decide to purchase. These details must include:
- any connection and maintenance charges that may apply;
- any additional charges relating to the type of telephone used to make the call; and
- the main terms and conditions applying.
Details of how to obtain all applicable terms and prices should also be included in all advertisements, using clear and unambiguous language.
Why this matters:
The Ofcom investigation in this case was conducted pursuant to the Enterprise Act 2002, which empowers relevant enforcement bodies to apply to the courts for injunctive relief in respect of persistent conduct in breach of various consumer protection-related directives. The measures involved here were the UK's Control of Misleading Advertisements Regulations 1988 and the Unfair Terms in Consumer Contracts Regulations 1999.
Clearly, the three companies who gave the undertakings reported were threatened with rather sterner action if they failed to do so.
As for Ofcom's aspirations to improve the clarity and transparency of pre-paid calling card advertising, it is not clear whether they intend to apply pressure to other Code writers and regulators, such as the Committee of Advertising Practice and the Broadcasting Committee of Advertising Practice, to add relevant rules to their Codes. Clearly, however, there is an issue here and those advertising these products should take heed.
