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Telecoms firms told to be clearer on mid-contract price hikes

Paloma Kubiak
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Paloma Kubiak

Broadband and mobile firms have been issued guidance on advertising deals which include mid-contract price hikes to avoid misleading or confusing customers.

The Advertising Standards Authority (ASA) has released guidance for telecoms firms requiring mid-contract price rises to be more prominently displayed in written and visual media campaigns.

It comes after a spate of price hikes a couple of months ago which saw millions of broadband, mobile and pay-TV customers slapped with up to 17% increases to bills which were written into the terms and conditions in contracts.

Earlier this year, the telecoms watchdog Ofcom launched a review of inflation-linked mid-contract price rises following concerns of its “unpredictable” nature which makes it hard for users to know how much they’ll pay.

This is because while some telecoms contracts have a fixed monthly price, many – if not most – have prices which are subject to increase during the minimum contract period.

These are split between tiered contracts that include a definite annual increase in line with say the Consumer Prices Index (CPI) or Retail Prices Index (RPI) measure of inflation either on its own or on top of a set percentage increase, or a set increase that isn’t tied to inflation.

Other contracts are variable and have a clause stating that the monthly price may rise in future, but the exact amount is unknown. Under Ofcom’s rules, with these contracts customers must be informed about any increase with one month’s notice and they can also exit the contract penalty-free.

Important not to mislead customers

The ASA said ads shouldn’t materially mislead consumers, or be likely to do so and this is determined by whether it will cause someone to take a different transactional decision.

A price that will or may be applied to a monthly contract price constitutes material information that people need in order to make an informed transactional decision.

As such, shoppers need clarity on how this information is presented, particularly when it comes to mid-contract price increases so that information is clearly and prominently displayed.

The ASA said information indicating that a price will or could rise needs to be of equal prominence to the price claim, with further details of this in subsequent information. This means firms shouldn’t state or imply that a price will apply for the full minimum term of the contract, if it’s not the case.

Ads with wording such as ‘fixed’ or ‘£X for X months’ is likely to mislead if the price could rise within the term.

If firms know the price will rise, this needs to be included in the main copy of the ad, and not in superimposed text in TV or video ads. It specifically covers asterisk marks linking to information which shouldn’t be more than one-step below the price claim. Further, an ad is unlikely to comply where a customer has to click or hover over a link in order to access the information.

Good practice example

The ASA gave this example of good practice for a tiered increase: £48/month until April 2023 Monthly price will increase each April by the Retail Prices Index rate of inflation published in January + 3.6%. For a variable increase: £28.99/month (price may rise during contract).

It also suggests RPI is written out in full the first time it is used in an ad and is followed with ‘rate of inflation’ to “aid understanding”.

And once the inflation rate on which a firm bases their inflation-linked increase has been published, they should update the information within five days and clearly state if the price rise applies to only one element of the contract and if customers exit one part of the bundle.

The ASA confirmed the guidance comes into effect on 15 December 2023, giving firms six months to implement changes. It doesn’t have the power to ban mid-contract price rises.

‘Deals will give clear information about price rises you face’

Alex Tofts, broadband expert at Broadband Genie, said: “When telecoms customers sign up to a contract, they expect to pay the same monthly price throughout, but only a handful of smaller providers commit to that promise.

“The problem for many is that these price rises are linked to inflation, as well as charges directly set by the provider. In a year that has seen inflation go above double digits, it means that most broadband, TV and mobiles customers have seen price rises unlike anything they have experienced before on their telecoms bills.

“This new guidance will make sure that the deals you see and hear about give you clear information about the price rises you will face. Whether or not we see providers actually implementing these changes is another matter, especially as the ASA has set a deadline of six months from now and not suggested how it will enforce it.”

He added that all eyes will now be on Ofcom to decide whether or not mid-contract price rises should be banned altogether.

“It is unfair for customers to continue to be put at risk of punitive charges, only to find that they cannot leave the contract because of the small print.

“If you have been hit by a price rise you can’t afford, make a note of your contract end date and switch to a cheaper deal. You should also speak to your provider to make them aware of the problem to see if they can help in any way,” he said.