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ASA Adjudication on The Carphone Warehouse Ltd

The Carphone Warehouse Ltd t/a Best Buy

Support Centre
1 Portal Way
London
W3 6RS

Date:

28 September 2011

Media:

Regional press, Press general

Sector:

Retail

Number of complaints:

2

Complaint Ref:

A11-159756

Ad

Two press ads, for mobile phones, were viewed on 20 May 2011. Both ads were headlined “iPhone 4. UK’s lowest price” and included large images of the phones. Small print stated “UK’s lowest price applies to prices published directly by other Apple authorised retailers and networks checked XX May 2011. Applies to new and upgrading Pay Monthly and Pay As You Go customers only. Price on Pay Monthly means phone cost on the specified tariff. Price on Pay As You Go means phone cost”.

a. The first ad also included smaller text below the image, which stated “Service Plan in-store £13.99 per month”. The date in the small print stated that published prices were checked on 18th May.

b. Smaller text below the image in the second ad stated “Geek Squad service plans available from £13.99 per month”. The date in the small print stated that published prices were checked on 19th May.

Issue

1. One complainant challenged whether ad (a) misleadingly implied the iPhone was available for £13.99.

2. The other complainant challenged whether the claim “iPhone 4. UK’s lowest price” misleadingly implied the UK’s lowest price was available from the Carphone Warehouse and Best Buy, because she understood lower prices were available elsewhere and the advertiser offered a price match to customers who located such a price.

CAP Code (Edition 12)

Response

1. The Carphone Warehouse (TCW) said they did not believe the ad implied the iPhone was available for £13.99, because “service plan” was commonly used to describe insurance for extended warranty products whereas it was not used to describe mobile phone tariffs. They said that was common practice throughout the industry and provided examples. They said they had not found any examples of companies using “service plan” to describe pay monthly tariffs and believed the term was clearly distinct from the generally understood “tariffs”, “price plan” and “line rental” that were used to describe pay monthly tariffs.

They said their service plan included both an extended warranty and insurance for domestic electrical goods. It was branded a “service plan” throughout Carphone Warehouse and Best Buy and they were confident that wording satisfied the requirements of the OFT (Office of Fair Trading) and the FSA (Financial Services Authority). TCW said they were legally required to display such service plan pricing information alongside all domestic electrical goods, including mobile phones, because it included an extended warranty. They said they did not believe consumers would be misled into thinking the iPhone was available for £13.99.

2. TCW said the claim was qualified by the wording in the footnote, which explained that the comparison applied only to prices published directly by other Apple authorised retailers and networks and that “Price on Pay Monthly means phone cost on the specified tariff. Price on Pay As You Go means phone cost”. They said the claim was therefore that no other authorised Apple reseller or network would be able to offer the iPhone on the same pay monthly tariff with a cheaper handset cost or on pay as you go with a cheaper handset cost. They said they proactively ensured that no authorised Apple reseller or network had published cheaper prices, they did this by running competitor checks via an agency, checking websites and collating screen shots and calling stores to check published prices. They said they continued to monitor published prices for the duration of the campaign and each time the ad was reprinted.

In addition, TCW offered to price match iPhone 4 prices, including those that were not published, that were offered to customers by other networks. They said Best Buy offered the same promise but with an additional 10% discount. They said the complainant could be correct that a competitor was cheaper, if they had been offered a price by a retailer that had not been published; for example, a special rate or discount in-store that was not usually offered or advertised. TCW said, however, it would be impossible to monitor unpublished prices and therefore they made clear in the footnote that the comparison was based only on published prices. They said they did not believe that the comparison was lessened by being based only on published prices, because they also matched unpublished prices with their price promise. They submitted evidence they had gathered to support the “UK’s lowest price” claim made in the press ads that appeared on 20 May 2011 and also included screen shots and an internal e-mail confirming that competitors’ stores had been called to check that prices hadn’t changed since the price checks had been completed. They said they did not rely solely on a price promise to substantiate the lower price claim. They believed they had substantiated the claim, because they had gathered considerable documentary evidence and ensured that they proactively checked competitors’ prices and amended their prices accordingly if necessary.

Assessment

1. Upheld

The ASA noted the ad was headlined “iPhone 4. UK’s lowest price” and that the only price referred to was “£13.99 per month”, next to text that stated “Service Plan in-store ...”. We also noted the text related to the price of the service plan was much smaller than the headline claim and was positioned further down the page. We considered, however, it was not clear that the text “Service Plan in-store ...” referred to an insurance product and that it therefore could be interpreted as suggesting the iPhone 4 was available for a monthly price of £13.99. We noted the small print made clear that the “lowest price” claim related to the price of the handset on a “specified tariff” for pay monthly customers and to the price of the phone more generally for pay as you go customers. We considered, however, that that text was insufficient to make clear that the stated price was not a tariff price but that it related to an insurance product. We therefore considered the ad could be interpreted as suggesting the iPhone was available for £13.99 per month. We concluded that the ad was misleading.

On this point, ad (a) breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising).

2. Upheld

We noted the complainant had located a cheaper price, for the same tariff, online after enquiring with TCW. We also noted, however, the ads included the small print “UK’s lowest price applies to prices published directly by other Apple authorised retailers and networks checked XX May 2011 ... Price on Pay Monthly means phone cost on the specified tariff. Price on Pay As You Go means phone cost”, which we considered made clear the comparison was between the price of handsets on a specified tariff for pay monthly customers and the price of the phone more generally for pay as you go customers, rather than between the tariff prices themselves.

We noted the data submitted by TCW indicated that, in some instances, their handset prices were lower than other operators. We also noted, however, that TCW handset prices were sometimes more expensive and that some competitors offered pay monthly tariffs, particularly at the lower end of the price spectrum, which did not appear to be available for handsets purchased via TCW and therefore did not allow for a “lowest price” comparison on those tariffs. We also noted that no data was submitted in relation to the cost of handsets for pay as you go options. We noted the comparative data referred only to the iPhone 4 16 GB and did not include information related to comparative prices for the 32 GB handset, whereas the ads referred to the “iPhone 4” generally. In addition we noted that while TCW offered handsets that were in some instances cheaper than their competitors for pay monthly tariffs, in many instances the price they offered was the same or higher. We considered consumers were likely to interpret the claim “UK’s lowest price” to mean that the prices TCW offered for handsets were lower, rather than equal to, the lowest prices offered by their competitors in all instances. Because that was not the case, we concluded that the ads were misleading.

On this point, ads (a) and (b) breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation), 3.17 (Prices), 3.33 (Comparisons with identifiable competitors) and 3.40 (Price comparisons).

Action

The ads must not appear again in their current form. We told TCW to ensure they held adequate substantiation for future price claims and that such statements were clear and were not misleading.

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