Background
The ASA understood that Ofcom had published guidance on mid-contract price rises, which covered the way in which the telecommunications sector rules on changes in contract terms applied to price rises. It made clear that if a communications provider wanted to increase the monthly core subscription price (or prices) agreed by the customer at the point of sale, Ofcom was likely to regard it as a materially detrimental contract change requiring the customer to be given at least one month's written notice of the increase and the right to terminate their contract without penalty. The guidance made clear that the importance of the core subscription price in the subscriber's choice of contract meant it should be clear to the subscriber before entering into any contract what the price offered and agreed was. It said the subscriber should be able to compare offers, make informed decisions and rely on the price agreed. Whilst we noted the guidance, we assessed whether the ads breached the CAP and BCAP Codes.
Ad description
A TV ad and an email promoted TalkTalk’s broadband service.
a. The TV ad, seen in March 2020, stated, “TalkTalk Faster Fibre is just £22.95 a month for 24 months, fixed until 2022”. The claim was also repeated on screen.
b. The email, received on 17 January 2020, stated, Fix your broadband price at £17.95 for the next 24 months … No mid-contract rises on your Fixed Price Plan …”.
Issue
Nine complainants, who were informed that the price of their broadband packages was to increase during the fixed contract period, challenged whether the claims “£22.95 a month for 24 months” and “fixed until 2022” in ad (a) and the claims “Fix your broadband price at £17.95 for the next 24 months” and “No mid-contract rises on your Fixed Price Plan” in ad (b) were misleading.Response
TalkTalk Telecom Ltd said they had launched fixed price plans in 2016, in which customers were offered a fixed price for their minimum contract term. They said the price could be changed in accordance with their terms and conditions, which included a clause stating that TalkTalk might need to change charges or agreements for legal, regulatory or business reasons. TalkTalk said the plans were designed and priced for a reasonable (pre-pandemic) environment such that consumers’ and TalkTalk’s expectations in paying a fixed price would be for a reasonable and normal usage of broadband. They believed it was reasonable to assume that neither consumers nor TalkTalk expected broadband usage, and the price thereof, to cover persistent long-term high usage as a result of lockdowns, including working from home, home schooling, being entertained and keeping in touch with friends, family and work colleagues. TalkTalk said their intent at the time the terms were created, and when the ads were made, was only to use the terms in exceptional circumstances, and they had not done so until April 2021.
TalkTalk said they were committed to ensuring their network remained part of the UK’s critical national infrastructure, and material investment was required to maintain their network. As usage increased, demand increased and therefore more investment was required. Pricing under their plans was based on a certain level of usage and incremental usage, but not to the extent that such usage increased to during the lockdowns. They said usage of their network increased from 3.3 Tbps to 5.4 Tbps between the launch of the plans and the beginning of 2020 and then in 2020 alone, due to the lockdowns, it significantly increased from 5.4 Tbps to 7.6 Tbps. Further, they did not believe that consumers expected to pay a fixed price for the level of usage seen during the lockdowns.
Therefore, due to exceptional circumstances, TalkTalk relied on the terms regarding fair usage and business reasons to make price changes. However, they believed the claims were justified and not materially misleading or likely to be misleading at the relevant times they were made. Unfortunately, the unlikely events had happened with the Covid-19 pandemic, meaning they had to change their approach to the plans, contrary to the claims, but that could not have been foreseen at the time. They believed the claims were substantiated at the time they were made because consumers would likely have understood the claims to mean that the price of the fixed price plans would be fixed during the minimum contract term, save in exceptional circumstances.
TalkTalk believed that previous ASA rulings supported their position that claims usually had certain limited exceptions that were not expressly mentioned in marketing claims, and that it would be unrealistic to expect that terms that were unlikely to be relied upon, but which later were due to unlikely circumstances, would be specifically stated in an ad. They cited examples of limitations to a price guarantee, fair-usage policies on ‘unlimited’ data claims, and next-day delivery claims.
Clearcast said at the time the ad script was cleared, they received confirmation that prices would be fixed for the minimum contract period of 24 months.
Assessment
Upheld
The ASA understood that there were three main types of contract relating to telecommunications packages: 'fixed', 'tiered' and 'variable'. In a fixed contract, consumers paid one fixed price throughout the contract period. In a tiered contract, consumers agreed to pay different prices at different times. In a variable contract, consumers agreed to pay a core subscription price for the fixed term of the contract (notwithstanding any 'special introductory prices'), but the provider reserved the right to increase the price at their discretion. We understood that the contracts offered in this case were fixed ones.
We considered that the monthly price of a contract was likely to be material to consumers when deciding on a telecommunications package, and that consumers were likely to understand from the ads that the price of their plans would be fixed for the duration of their contract. Ad (b) explicitly stated that there would be “no mid-contract rises on your Fixed Price Plan”. The name of the plan in that ad was also likely to reinforce the idea that prices would not rise for consumers during their contract.
We acknowledged the increase in the usage of the network during the Covid-19 pandemic was unlikely to have been foreseen at the time the ads were seen. However, we disagreed with TalkTalk that consumers would not expect to pay a fixed price for the level of usage seen during the lockdowns. Consumers had agreed a price for their broadband to be delivered with a particular speed, to be used as required, and they would expect that price to be honoured.
Consumers were likely to understand that some limitations would exist in many cases to advertising claims, and we agreed that a one-off incident would not undermine a general claim such as ‘next-day’ delivery, for example. However, in the context of the price of a contract which was described as ‘fixed’, we considered that consumers would expect to be able to rely on that price during the period for which it was claimed to be fixed.
Because the ads claimed that the price of the contracts would be fixed for 24 months, and ad (b) claimed that there would be no mid-contract price rises, when that was not the case, we concluded that the ads were likely to mislead.
Ad (a) breached BCAP Code rules 3.1 3.1 Advertisements must not materially mislead or be likely to do so. (Misleading advertising) and 3.18 3.18 Price statements must not mislead by omission, undue emphasis or distortion. They must relate to the product or service depicted in the advertisement. (Prices). Ad (b) breached CAP Code (Edition 12) rules 3.1 3.1 Advertisements must not materially mislead or be likely to do so. (Misleading advertising) and 3.17 3.17 Advertisements must not explicitly claim that the advertiser's job or livelihood is in jeopardy if consumers do not buy the advertised product or service. (Prices).
Action
The ads must not appear again in the same form. We told TalkTalk Telecom Ltd not to claim that prices were ‘fixed’ or that there would be no mid-contract price rises if that was not the case.
