ASA Adjudication on 1&1 Internet Ltd
1&1 Internet Ltd
10–14 Bath Road
19 September 2012
Internet (on own site)
Number of complaints:
Summary of Council decision:
Two issues were investigated, both were Upheld.
A website offering web hosting services, run by 1&1 Internet Ltd. A table beneath the headline "SECURE YOUR DOMAIN NAME TODAY" showed prices for various domains, including .co.uk, .com and .net sites. Next to the .co.uk domain the price £2.99 was crossed through and text stated "first year (Limit 1 per customer) £0.99*". Small print at the foot of the page stated "Prices exclude VAT. *Additional Offer Terms and Conditions apply". A link to the terms and conditions was provided. These included the text ".co.uk domains: £0.99 First Year ... The second and subsequent years will be charged at the regular price. Payments are based on a 24-month billing cycle, which means that when you register you will be charged for the first 24 months of your contract".
The complainant challenged whether:
1. the ad was misleading, because it did not make clear that the prices were dependent on buying the domain for a second year at the full price; and
2. the ad breached the Code, because VAT was not included in the headline prices.
CAP Code (Edition 12)
1. 1&1 Internet Ltd (1&1 Internet) said they accepted that the CAP Code set out a number of important principles, including that advertising should not mislead by inaccuracy, ambiguity or exaggeration. They stated that they had since added the phrase "two year registration cycle" to the price claim for a .co.uk domain.
2. 1&1 Internet said it was standard industry practice to display prices exclusive of VAT and asserted that it would be more confusing for customers if they now did the opposite. They did not consider that quoting VAT-exclusive prices was misleading. They stated that the majority of their customers were businesses who would therefore be able to recover VAT against their purchases.
The ASA noted that a link to the terms and conditions was provided at the bottom of the page, and linked by an asterisk. We acknowledged that the terms and conditions contained text which explained that, for .co.uk domains, customers would be billed for a 24-month period upon registering. However, we considered that this information constituted a significant condition and should therefore have been prominently displayed near to the price claim. Because it was not, we concluded that the ad was misleading.
Whilst we welcomed 1&1 Internet's apparent willingness to change their advertising, we did not consider that the revised text clearly explained to customers that they would be billed for a full 24-month period upon signing up.
On that point the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 3.17 (Prices).
We acknowledged that 1&1 Internet said most of their customers were businesses and their method of advertising VAT-exclusive prices was standard practice within the industry. However, we noted that the CAP Code required that VAT-exclusive prices be given only if all consumers to whom the price claim was addressed paid no VAT or could recover VAT. We noted that some of 1&1 Internet's customers did pay VAT. We considered that the price claims were not clearly addressed to businesses and therefore the ad should have displayed VAT-inclusive prices with at least equal prominence to the stated prices.
Because VAT was not included in the headline prices, and because some of the customers registering for the service would have to pay VAT, we concluded that the ad breached the Code.
On that point the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 3.17 and 3.18 (Prices).
The ad must not appear again in its current form. We told 1&1 Internet to ensure that, unless their price claims were clearly addressed to consumers who paid no VAT or could recover VAT, they displayed VAT-inclusive prices. We also told 1&1 Internet to make clear in the body of the ad that customers buying .co.uk domains would be entering into, and billed for, a 24-month contract at the time of registration.