THE CODE COMPLIANCE PANEL OF PHONEPAYPLUS TRIBUNAL DECISION

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THE CODE COMPLIANCE PANEL OF PHONEPAYPLUS

TRIBUNAL DECISION

Thursday 9 July 2009 TRIBUNAL SITTING No. 31 / CASE 3 CASE REFERENCE: 769529/AM

Service provider & area: Mobile Interactive Group, London Information provider & area: Jackpot UK, Cheshire

Type of service: Scratch Card competition service

Service title: ‘Cash Attack’, ‘Win a Mini Cooper’, ‘Scratch and Match and Win a DVD’ TV advertisement.

Service number: 80556, 82123 and 87202

Cost: £10.50 plus £5 per week if prize or award is claimed by text

Network operator: All mobile operators Number of complainants: 95

THIS CASE WAS BROUGHT AGAINST THE SERVICE PROVIDER UNDER PARAGRAPH 8.5 OF THE CODE

BACKGROUND

The PhonepayPlus Executive (the ‘Executive’) received 95 complaints regarding various scratch card competitions operating on shortcodes 80556, 82123 and 87202.

These complaints related to the ‘subscription’ element of the scratch card competition.

The scratch cards were heavily promoted in over 300 publications where consumers are invited to scratch three panels. Upon scratching three matching symbols on the scratch card,

complainants could proceed with the claims process in order to receive their award. In order to claim an award, users were asked to call the fixed premium rate phone number 09050051695 or text a keyword (printed on the scratch card) to one of the shortcodes.

Alternatively, they could claim their award via post. When complainants claimed their award by text message they were automatically entered into a ‘weekly competition’ subscription service called ‘Jackpot UK’ at a cost of £5 per week. Some complainants stated they had received unsolicited text messages and appeared to have been unaware that they had joined a subscription service.

Promotional material

The scratchcards were heavily promoted in publications such as ‘Women & Home’, ‘World of Cross Stitching’, ‘Classic Cars’ and most major tabloid newspapers. Throughout the scratch card promotion, the service used over 700 different keywords on shortcode 82123 and approximately 50 keywords on shortcode 87202.

The Information Provider also used a television advertisement which was promoted across various programming schedules. The television promotion gave viewers a one in five chance to win a DVD player and entry into the same subscription service as the scratch cards. The television promotion only used three keywords - ‘DVD’, ‘WIN’ and ‘PRIZE’.

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Cost of Service

The service operated on three shortcodes. The shortcode 80556 was used for the television promotion competition and was the billing shortcode for the subscription service. The scratch card competitions were promoted and billed on shortcodes 82123 and 87202.

The cost of entry into the scratch card competition by text or fixed line was £10.50 (7 x £1.50 reversed-billed messages / 7 minute call charged at £1.50 per minute). If users entered by text message they were also entered into the subscription service which was charged at £5 per message, one message per week. If the user won a non-cash prize they also incurred a £5.50 delivery charge.

Entry into the television competition was free but, as the only method of entry was by text, users were automatically entered into the subscription service.

Operation of the Service The Scratchcard Competition

The consumer was invited to scratch three panels. If the consumer had three matching symbols, he or she could start the claim process. In order to claim their award the user required a ‘valid collection number’ which could be obtained by either calling the fixed line number 09050051695 or by sending a text message containing the printed keyword to shortcode 82123. The user then entered the ‘valid collection number’ onto the scratch card and posted it to the address provided where their award was dispatched within 31 days.

Where the user claimed their award by text, users were entered into a ‘weekly competition’ subscription service called ‘Jackpot UK’ costing £5 per week.

The user also had the opportunity to claim their award by post. The television advertisement competition

The television advertisement lasted for 35 seconds and promoted a one in five chance of winning an HD-ready DVD player and entry into the subscription-based service. The television advertisement voiceover stated as follows:

“Some games you can’t play everywhere, but subscribe for a fiver a week and you can play Jackpot UK. Text win to 80556 answer one question correctly and you have a one in five chance of winning a HD ready DVD player. Jackpot UK”

During the television advertisement the words ‘Text WIN to 80556’ remained static and three separate captions appeared one after the other. The captions were similar to or along the lines of the following:

Static wording: “Text WIN to 80556

Caption 1: “16+. Only subscribers can win £1000/week cost £5/week” Caption 2: “Network charges apply. Send STOP to 80556”

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Complaint Investigation Standard Procedure

The Executive conducted this matter as a standard procedure investigation in accordance with paragraph 8.5 of the Code.

A breach letter dated 28 April 2009 was sent by the Executive to the Service Provider raising potential breaches of paragraphs 5.4.1a, 5.7.2 and 7.6.6a of the PhonepayPlus Code of

Practice 11th Edition Amended April 2008 (‘the Code’). A formal response was received from the Service Provider on 29 May 2009.

The Tribunal made a decision on the breaches raised by the Executive on 9 July 2009.

SUBMISSIONS AND CONCLUSIONS ALLEGED BREACH ONE

FAIRNESS- MISLEADING (Paragraph 5.4.1a) Services and promotional material must not: (a) mislead, or be likely to mislead in any way

1. The Executive submitted that it had received complaints in relation to this service and the majority of the complainants had stated they had received unsolicited chargeable messages in association with the Service Provider’s subscription-based service The Executive submitted that the scratch cards were promoted to a varied cross-section demographic and as such the Executive was of the opinion that some of these consumers may have had little or no knowledge of the way in which premium rate services operated.

The Executive submitted that the scratch cards placed a heavy emphasis on the winning element, whereas the subscription element of the service was printed in significantly smaller print within other pricing information. The Executive submitted that this was further aggravated by the fact that consumers who had studied the card would have seen the wording "you will gain subscription…". The Executive was of the opinion that this wording merely alluded to the subscription and could be construed in a number of ways by consumers (i.e. there was an implication that there was a subscription, however it could be interpreted to mean that it was optional or available at a later stage).

The Executive submitted that it believed that a reasonable consumer's expectation upon viewing the promotion was that they would be making a one off payment to claim their prize/award and as such would not be expecting to be entered into a subscription-based service.

The Executive referred to the high volume of complaints which specifically related to the subscription element of the service and submitted that these complaints demonstrated that the manner in which the scratch cards had been promoted and the manner in which the ambiguity of the service’s subscription element had misled, or was likely to mislead, consumers into entering a subscription-based service.

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2. The Service Provider stated that the Executive’s submission that the consumer was presented with the wording “you will gain subscription”, was not the case as all

promotional material had stated “you will also gain subscription”. The Service Provider stated that the Information Provider believed that there was a material difference as the word ‘also’, by definition, meant ‘in addition’ and clearly indicated that the service was part of the standard prize claim process.

The Service Provider further stated that the Information Provider had sought copy advice with regards to the wording of the promotion on four separate occasions and that on each occasion the wording on the front of the scratchcard was the same and used the phrase “you will also gain subscription”. The Service Provider stated that despite the Copy Advice Team looking in detail at the wording, at no point did the Copy Advice Team raise any concern with the phraseology used, and therefore, the Information Provider could not have anticipated that there would be a problem in respect of this issue.

The Service Provider also stated that paragraph 7.12 of the Code (Subscription Services) had been fully adhered to as a further safety net to any consumer who had failed to read the pricing information on the scratch card. The Service Provider stated that all consumers who entered the service had first received a free ‘initiation message’ outlining the name of the service, confirmation that it was a subscription-based service (including billing period), the charge for the service, how to leave the service and the Service Provider’s details in the form of a customer helpline. The Service Provider also stated that further clarification of the subscription service element of the promotion was also clearly explained in the terms and conditions on the reverse of the scratch card. The Service Provider stated that many of the consumer complaints put forward as evidence by the Executive were not factually accurate.

The Service Provider also stated that the Executive’s breach letter had alluded to a high volume of complaints but that the alleged 95 complaints related to less than 0.1% of text message players and 0.02% of the Information Provider’s total player base. The

Information Provider was of the opinion that the number of complaints should only be considered in relation to the size of the promotion.

3. The Tribunal considered the evidence and concluded that, in the absence of a clear indication to the contrary, it would have been reasonable for consumers to expect that, by submitting a claim, they were making a one-off payment and not in fact joining a subscription-based service. The Tribunal noted that the wording on the scratch card was “you will also gain subscription” and found that this wording could be read as merely alluding to a subscription element of the service which would be made available to participants at a later stage. The Tribunal therefore concluded that this wording was likely to mislead as it was not clear that consumers would automatically be entered into the subscription if they made a claim by text. The Tribunal also found the information in relation to the subscription element of the service had been set out in significantly smaller text within the other pricing information on the scratch card which increased the likelihood that consumers would be misled. The Tribunal further concluded that the complainant evidence indicated that, on the balance of probabilities, consumers had actually been misled by these factors. The Tribunal decided therefore to uphold a breach of paragraph 5.4.1a of the Code.

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Decision: UPHELD

ALLEGED BREACH TWO

PRICING INFORMATION (PROMINENCE) (Paragraph 5.7.2)

‘Written pricing information must be easily legible, prominent, horizontal and presented in a way that does not require close examination. Spoken pricing information must be easily audible and discernible.’

1. The Executive submitted that the pricing information in comparison to the rest of the text on the scratch card was comparatively small and required close examination. The Executive also stated that the legibility of the pricing information text was further reduced as it was set out on a multi-coloured background.

2. The Service Provider stated that the Information Provider refuted that the pricing information was in breach of 5.7.2 of the Code and it believed that the pricing

information was clear, prominent and did not require close inspection. The Information Provider stated to have had over 200,000 players and to date was only aware of one individual complaint regarding the physical clarity of the pricing information.

The Service Provider stated that the Information Provider had sought copy advice with regards to the layout of the pricing information on four different occasions and on each occasion the wording on the front of the card was of the same font size, in the same location and had been given the same prominence. The Service Provider stated that, despite the fact that the Copy Advice Team had looked in detail at the advertisement layout, at no point had the Copy Advice Team raised any concerns that the pricing information required close examination, as such, the Information Provider could not have anticipated there would be a problem in respect of this issue. The Service Provider stated that had it received advice to the contrary the Information Provider would have heeded this advice before commencing the promotion.

3. The Tribunal considered the evidence and concluded that on the basis of the examples of actual scratch cards provided by the Executive, the pricing information on the ‘Cash Attack’ scratch cards was not easily legible and required close examination due to size of the wording, the font style and the multi-coloured background which had been used. In relation to the actual example of the ‘Scratch and Match’ scratch card, the Tribunal concluded that the pricing information required close examination due to the size of the wording. The Tribunal therefore decided to uphold a breach of paragraph 5.7.2 of the Code.

The Tribunal noted that, contrary to the Information Provider’s submissions, the

Information Provider had received copy advice on 14 August 2008 regarding legibility of the pricing information on the ‘Cash Attack’ scratch card and in particular the fact that the use of a multi-coloured background made the text difficult to read, although it appeared the Information Provider had not fully implemented the advice given. The Tribunal commented that, even if these issues had not been raised by the Copy Advice team, it would still have concluded that the pricing information required close

examination and was therefore in breach of 5.7.2 of the Code.

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ALLEGED BREACH THREE

COMPETIONS AND OTHER GAMES WITH PRIZES (paragraph 7.6.6) ‘Competition services and promotional material must not:

a) use words such as ‘win’ or ‘prize’ to describe items offered to all or a substantial majority of participants’

1. The Executive submitted that the scratch cards promoted by the Information Provider had consistently contained more than one 'game' (generally four 'games' per card). The Executive submitted that it did not consider that each of the four 'games' should be treated separately for the purpose of promotion or for providing winning statistics but should be viewed as component parts of the same scratch card game. The Executive submitted that it was highly unlikely that a consumer would ever receive a single 'game' card (since they were distributed in strips of two, three or four games) and, as such, the Executive was of the opinion that the vast majority of consumers would have scratched all available 'games' on the scratch card and would consistently scratch at least one least winning game.

The Executive submitted that the ‘£10,000 CASH ATTACK’ scratch card had four games and it had consistently found that within each scratch card there was one 'cash' and one 'non-cash prize winning game'. The terms and conditions on the reverse of each game stated that "overall there is a 1 in 4 chance of winning a cash prize and 1 in 4 chance of winning a non-cash prize", falsely indicating that when a consumer scratches two winning games that they have been unusually fortunate.

The Executive submitted that, as consumers were ‘guaranteed’ as opposed to a having a 'chance' to win a cash or non-cash item, the use of the words 'CASH WINNER' and 'PRIZE WINNER' to describe items offered to all or a substantial majority of participants was in breach of paragraph 7.6.6 of the Code.

2. The Service Provider stated that the Information Provider had sought copy advice with regards to the wording and mechanic of the promotion on two different occasions. The Service Provider stated that despite the game mechanics being discussed in detail, at no point had the Copy Advice Team raised any concerns with the use of the words ‘Win’ and ‘Prize’ as such the Information Provider could not have anticipated there would be a problem in respect of this issue. The Service Provider stated that, had the Information Provider received advice to the contrary, it would have heeded this advice before commencing the promotion.

The Service Provider stated that prior to the launch of the promotion and upon the advice of the Executive, the Information Provider had sought legal advice as to the structure of their scratch cards and had followed the advice. The Service Provider stated that the Information Provider believed that the Executive had failed to understand the promotion structure and distribution of scratch cards and continued to assert that all scratch cards contained ‘one cash and one non-cash winning game’ when this was not the case and there was no evidence to substantiate this statement. The Service Provider stated that the sample cards that showed both games had been sent into the Copy Advice Team and to the Executive under the informal investigation process, however the actual cards had been printed and inserted with different winning combinations of games

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It also stated that these cards had been promoted in strips of two, three and four games, with some cards having a cash prize, others having a non-cash prize and others having both cash and non-cash prizes. The Service Provider claimed that as stated in the scratch card rules, over the entire promotion there was a one in four chance of winning a cash prize and a one in four chance of winning a non-cash prize. It also stated that, due to the fact that in each individual game a consumer had less than a 25% chance of winning any individual item, no item could be deemed to be offered to all or a substantial majority of participants.

3. The Tribunal considered the evidence and found that each strip of two, three or four games contained a cash or non-cash award and it was reasonable to assume that all or a substantial majority of consumers would play all the games on each strip of scratch cards. The Tribunal therefore concluded that it followed that all or a substantial majority of consumers would be able to claim a cash or non-cash award and the word ’win’ or ‘prize’ should therefore not have been used and this use was therefore in breach of the Code. The Tribunal therefore decided to uphold a breach of paragraph 7.6.6 of the Code.

Decision: UPHELD

SANCTIONS

The Tribunal’s initial assessment was that, overall, the breaches taken together were significant.

In determining the sanctions appropriate for the case the Tribunal took into account the following aggravating factors:

• The behaviour of the Information Provider was deliberate in the design of the scratch card and the misdescription of the cash and non-cash awards as ‘prizes’;

• There was material consumer harm as there were 95 complainants and the scratch cards had been widely promoted;

• The cost paid by individual consumes was high – consumers were charged at least £10.50 and some were charged considerably more due to the subscription charges; • Concealed subscription services have been singled out for criticism by PhonepayPlus; • The Service Provider’s breach history.

In mitigation, the Tribunal noted the following factors:

• The Service Provider co-operated with the Executive during the investigation;

• The Service Provider stated that it offered a refund policy for users that were unhappy with the service.

The Tribunal noted the comments of the Service Provider regarding the compliance advice in response to the breach allegations. The Tribunal found evidence that whilst advice had been sought, in several respects the compliance advice given by the Executive had not been properly implemented. The Tribunal also noted that some breaches had not identified in the compliance advice given by the Executive but reminded the Service Provider that the Tribunal was not in any event bound by the Executive’s advice and the Tribunal also had to take into account the

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complainant evidence which, in this case, showed actual confusion on the part of users of the service.

Having taken into account the aggravating factors (including the material consumer harm and the deliberate behaviour of the Information Provider) and the mitigating factors, the Tribunal concluded that the seriousness of the case should be regarded overall as serious.

The Tribunal therefore decided to impose the following sanctions: • A Formal Reprimand;

• A £100,000 fine;

• The Tribunal imposed a bar on the service and its promotion and all other scratch card-based services (including scratch card-card-based subscription services) and related

promotions, for a period of three months and thereafter until the Service Provider seeks and implements compliance advice to the satisfaction of the Executive (such bar not to apply to delivery of subscription services to existing subscribers);

• The Tribunal also ordered that claims for refunds are to be paid by the Service Provider for the full amount spent by users, except where there is good cause to believe that such claims are not valid.

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