UK Advertising Watchdog Slaps Virgin Media for Mid-Contract Price Hikes

The Advertising Standards Authority has upheld two complaints against website adverts for Virgin Media’s cable broadband and phone deals, which they ruled were misleading due to the operator raising the cost above what they promoted and thus being in breach of Ofcom’s rules on mid-contract price hikes.

Under Ofcom’s “guidance” mid-contract price rises that are “likely to cause material detriment” to the customer have effectively been banned (here), although there is a small caveat for certain increases through annual inflation. Otherwise any such price rises that do occur will give the customer an automatic right to cancel their contract penalty free.

But two complainants claimed that a number of promotions for Virgin Media’s service, such as their offer of the 50Mbps Big Connection bundle for “Just £4 a month for 6 months then £17.50 a month + Virgin Phone line (£16.99 a month) … 12 month contract,” were misleading because they understood that the price they paid was due to increase more than stated in the offer.

At this point the ASA’s report seems poorly structured as it only makes clear reference to the +£3 increase in its final ruling and fails to clarify precisely what the price rise actually reflects. The ASA essentially appears to have no objection to offers like the one above, so long as ISPs keep to the prices they promote for the duration of a contract.

It’s worth pointing out that Virgin Media did admit they might increase certain prices, such as line rental, during the contract term. However the operator stated that “they did not know if, when, or by how much a customer’s core price might rise at the start of the contract” and so could not state it in the advert, yet many of the price rises we see tend to follow a very predictable annual pattern and clearly the ASA didn’t buy their excuse.

ASA Ruling (REF: A14-288386)

However, we understood that, because the contracts were variable, the price was not fixed, and could be increased at Virgin’s discretion. Both complainants were subsequently told that the price would increase by £3 before the end of the minimum term.

We considered that the monthly price of a contract was likely to be material to consumers when deciding on a telecommunications package, and that they might not choose a particular package if they knew that the monthly cost could increase beyond the amounts stated in the ad, during the minimum term. Therefore, we considered that the price claim should have been immediately qualified to explain to consumers that it was not fixed throughout the minimum term, and that the contract was a variable one in which the price could rise.

Because subsequent price rises meant the advertised price claims for the packages did not represent the prices that consumers would pay throughout the minimum term of the contract, across both the promotional and standard periods, and because it was not made clear that the contract was a variable one in which prices could increase, we concluded that the ad was misleading.

As usual the ASA banned Virgin Media’s promotion and told the provider to “clearly and prominently” state when a contract is variable and “not to suggest that a price would be fixed for the minimum term of the contract, or for a certain period of time, if that was not the case“. Other ISPs might also wish to take note.