Background
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
A website for the careline alarm service, www.telecare24.co.uk, seen on 29 October 2018, featured a page containing different pricing plans. The website stated “Standard Plan. £120.00/yr. £167.88/yr [strikethrough price].” Further text stated “SPECIAL OFFER - Originally £167.88 - now just £120!. 3 MONTHS FREE in the first year when you select ‘Billed Annually’”. Beneath the pricing plans, text stated “Terms and Conditions Apply. All prices shown apply if you qualify for VAT exemption, full details available on our FAQ section". “A £45 one-off payment is payable for all new customers … This payment will appear in the shopping cart when you order. The standard plan 3 Months free offer is based on the saving made when selecting the annual payment option compared to the monthly fee over a 12 month period. Any discounts available are an introductory offer, standard pricing applies after the initial period”.
Issue
The complainant challenged whether the ad:
1. was misleading by using VAT-exclusive prices; and
2. made sufficiently clear the total annual cost of the plan each year, as they understood that a higher charge would be applicable after the first year.
Response
1. Telecare 24 UK Ltd said they displayed VAT-exclusive pricing because the vast majority (over 85%) of their customers did not pay VAT on their services due to illness or disability. They said that the remaining 15% would include a number of businesses such as care homes who also did not pay VAT, meaning that the number of customers who would not be VAT exempt would be extremely small. They believed that it would be inappropriate to display the VAT price for the small minority of customers who did not claim the VAT Exemption. They said they asked each individual customer to complete their VAT Exemption Declaration before they made their payment. If the customer did not fill out that section, the pricing on display immediately changed to show the total amount and the amount of VAT payable on the checkout page. They said the whole industry presented their pricing in the same way, and it would therefore not be proportionate to amend their pricing for the small minority.
2. Telecare 24 UK showed that they had made changes to their advertising upon receipt of their complaint, whereby they had added the strikethrough price of £167.88 to show the regular cost of the product. They explained that their Standard Charge was £167.88 for the Standard Plan, but was discounted to £120 in the first year, meaning that the first three months were free. In subsequent years, the cost returned to £167.88. They said they did not operate a minimum contract, meaning that the customer was able to return their equipment at any time for a pro-rata refund.
Telecare 24 UK Ltd said the ad made clear that £120 was a special offer, which was paid annually. They said the ad had the regular undiscounted cost of £167.88 crossed out to emphasise the point. They believed the display made it more obvious that the customer was receiving a discount in the first year by paying annually. They said the one-off £45 payment was mentioned specifically in the text below the pricing box, which stated “a £45 payment is payable for all new customers”. That text also explained further that “any discounts available are an introductory offer, standard pricing after the initial period”.
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 careline 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 also acknowledged that any business customers such as care homes would also be exempt from paying VAT. However, we considered that a significant number of elderly customers would not have chronic illnesses or disabilities, and indeed noted that Telecare estimated that 15% of their customers were not caught by the exemption. Because not all of Telecare’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 “all prices shown apply if you 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.
While we acknowledged that the VAT-exclusive price alongside the circumstances under which VAT would be payable was given towards the end of the customer journey and in a linked-to FAQ page, we considered that by that point customers had already made a transactional decision in relation to purchasing the service.
Because Telecare did not provide a VAT-inclusive price when a significant number of their customers would 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 consumers would understand from the headline price claim “£120/yr” alongside the strikethrough price of £167.88/yr that the cost of the plan was previously set at £167 per year, but was now £120 per year. We considered that the prominent claim “SPECIAL OFFER - Originally £167.88 - now just £120!” reinforced the impression that the cost of the plan was previously £167.88 per year, and was now £120 each year. While we noted that smaller text below contained the claim “any discounts available are an introductory offer, standard pricing applies after the initial period”, we considered that did not itself suggest that £120 was not the standard price, and was, in any case, insufficiently prominent such that it was likely to be overlooked by consumers. We also noted that the smaller text stated “A £45 one-off payment is payable to all new customers”, but considered that text was insufficient to override the overall impression of the ad that the annual plan cost £120 per year.
We understood that the annual plan actually cost a total of £165 (excluding VAT) in the first year when the one-off payment for new customers was factored in, and £167.88 (excluding VAT) for every subsequent year. Therefore, while we acknowledged the changes Telecare had made to their website, because the ad suggested that the Standard Plan cost £120 each year, 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 Telecare 24 UK 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 £120/yr and make clear the total cost of the Standard Plan inclusive of the one-off £45 payment and any other additional fees.
