Background
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
A website, www.lifeline24.co.uk, seen on 15 August 2018, promoted a personal alarm service, included a web page titled “Pricing” with the text “Annual Plan £119* With 3 months free SPECIAL OFFER!”. Further text stated “*VAT exempt price. You may qualify for VAT exemption. £35 new customer fee applies”.
Issue
The complainant challenged whether:
1. inclusion of the VAT-exclusive price was misleading; and
2. the claim “Annual Plan. £119* With 3 months free” was misleading, as they understood that a higher charge would be applicable after the first year.
Response
1. Lifeline24 Ltd stated that the vast majority of their customers qualified for VAT exemption for the product. They had included a separate page on their website that explained the rules regarding VAT exemption.
2. Lifeline24 said that initially the ad did not state that the offer did not stand after the first year and that information was included on a separate page on the website. They had since changed the web page to state that the discounts available were an introductory offer and did not apply after the initial 12 months and they also included the renewal price.
Assessment
1. Upheld
The CAP Code stated that quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. However, VAT-exclusive prices could be given if all those to whom the price claim was clearly addressed paid no VAT or could recover VAT. Such VAT-exclusive prices must be accompanied by a prominent statement of the amount or rate of VAT payable.
We understood that customers with chronic illness or disabilities were exempt from paying VAT. We noted the ad in question was for a personal alarm service for the elderly and infirm, and acknowledged the service was likely to have a number of customers who would be exempt from paying VAT. We considered that, although Lifeline24 stated that the majority of their customers were exempt from paying VAT, a number of their customers would not fall within the VAT exemption criteria. Because not all of Lifeline’s customers were exempt from paying VAT, in addition to displaying the VAT-exclusive price, we considered that the ad was required to also include the VAT-inclusive price.
We noted that the ad featured the qualification “*VAT exempt price. You may qualify for VAT exemption”. However, we considered that was insufficient to make clear that the VAT-exclusive price claims were addressed to those with chronic illnesses or disabilities. Furthermore, the VAT-exclusive prices were not accompanied by a prominent statement of the amount of VAT payable.
We acknowledged that the VAT-exclusive price alongside the circumstances under which VAT would be payable was provided on the next page of the customer journey. However, we considered that by that point consumers had already made a transactional decision in relation to purchasing the product.
Because Lifeline did not provide a VAT-inclusive price, when a significant number of their customers were likely to be required to pay VAT, and because the VAT-exclusive prices were not accompanied by a prominent state of the amount of VAT payable and were not addressed to those with chronic illnesses or disabilities, we concluded that the ad was likely to mislead.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 3.1 Marketing communications must not materially mislead or be likely to do so. (Misleading advertising) and 3.18 3.18 Quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. However, VAT-exclusive prices may be given if all those to whom the price claim is clearly addressed pay no VAT or can recover VAT. Such VAT-exclusive prices must be accompanied by a prominent statement of the amount or rate of VAT payable. (Prices).
2. Upheld
The ASA considered that consumers would understand from the claim “Annual Plan £119* With 3 months free SPECIAL OFFER!”, to mean that the cost of the plan in the first year was £119, with three out of the first twelve months free of charge.
We noted, however, that customers were required to pay an additional new customer fee of £35, meaning that the Annual plan cost £154 (excluding VAT) in the first year. While we acknowledged that the ad featured a qualification which stated “£35 new customer fee applies”, we considered that was insufficient to override the overall impression of the ad that the annual plan cost £119 in the first year.
Therefore because the ad suggested that the Annual Plan cost £119 when that was not the case, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
(Misleading advertising),
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
3.10
3.10
Qualifications must be presented clearly.
CAP has published a Help Note on Claims that Require Qualification.
(Qualification) and
3.18
3.18
Quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. However, VAT-exclusive prices may be given if all those to whom the price claim is clearly addressed pay no VAT or can recover VAT. Such VAT-exclusive prices must be accompanied by a prominent statement of the amount or rate of VAT payable.
(Prices).
Action
The ad must not appear again in its current form. We told Lifeline24 Ltd to feature the VAT-inclusive price in the ad alongside the VAT-exclusive price and to make clear to whom the VAT-inclusive and exclusive prices were addressed, for example, to those with chronic illnesses or disabilities. We told them to ensure the VAT-exclusive price was accompanied by a prominent statement of the amount of VAT payable. We also told them to remove the claim ‘Annual Plan £119’ and make clear the total cost of the Annual Plan inclusive of the one-off £35 payment and any other additional fees.
