ASA Enforce New Mid-Contract Price Hike Rules for UK Broadband ISPs

The Advertising Standards Authority (ASA) will tomorrow officially begin to enforce new guidance for how UK broadband ISPs and mobile network operators should communicate mid-contract prices hikes to consumers, which could make such policies clearer and more transparent. But it arrives as Ofcom move (here) to ban the practice.

Mid-contract price increases are by no means a new problem, although in recent years many ISPs – particularly the biggest players – have made life more difficult for consumers by adopting annual hikes that are directly linked to inflation (usually something like 3-4% plus the rate of annual inflation [CPI or RPI] on a set date), which results in big inflation busting price rises. In some cases, these can even hit right after a new customer has joined.

The approach may also make it harder to exit your contract penalty free, since such policies are easier to write into an existing contract and are thus technically more transparent. But past surveys have shown that many consumers don’t have a proper understanding of inflation (here) and it doesn’t help that broadband providers often do a poor job of explaining the impact, especially when they hide such details away (small print etc.).

The good news is that the UK’s advertising watchdog (ASA) – supported by the UK Committees of Advertising Practice (CAP and BCAP) – has today imposed new guidance that effectively requires internet service providers to be clearer and more transparent with how they present their packages and prices. The ASA does NOT have the power to ban mid-contract hikes, but they can certainly hold ISPs and their promotions to a higher standard.

“It is crucial that information about any future price increases are clear to consumers in the ad itself, to avoid creating a misleading impression that the initial stated price will remain the same throughout the contract period,” said the ASA.

Key Principles of the New Guidance

The new guidance makes clear that ads are less likely to mislead consumers when:

➤ They do not state or imply that a price will apply for the full minimum term of the contract, if that is not the case – for example, claims such as “£X for X months” or “fixed for X months” are unlikely to be acceptable if the price is due to rise and any subsequent qualifying information is likely to contradict rather than clarify the claim.

➤ Price claims are qualified with equally prominent information alerting consumers to the presence or possibility of a mid-contract price increase.

➤ The details of what the increase will be based on are featured prominently relative to the price.

➤ Inflation terminology is presented in a way that is clear and simple to understand.

➤ They include the full amount the consumer will pay after the increase, once the relevant rate is known.

➤ They make clear where terminating a variable contract due to a price increase will impact other linked services.

History tends to show that some ISPs will be slow to adhere to the ASA’s new guidance. On top of that, we can probably expect to see the odd provider fall foul, which is likely to be picked up in complaints to the watchdog by consumers and rival providers. The ASA often issues its rulings months after the damage from a misleading ad has been done, but over time they can still help to create some positive change.

Overall, this is a small but positive step forward, although it has perhaps lost some of its importance after Ofcom this week announced that they were effectively “banning” the practice of mid-contract price hikes that are linked to inflation (here). But it’s likely to be the end of 2024 before that change is introduced, and it doesn’t completely prevent mid-contract price hikes. In that sense, the ASA’s new guidance will still be helpful in ensuring greater transparency for consumers.

A quick spot check of the big ISPs today suggests that precious little of the confusion that surrounded the old approach is likely to be tackled. Many people don’t understand inflation and, at the same time, a customer can’t know the result of a future hike policy until the relevant CPI/RPI figures are actually published. Suffice to say, it’s easy to understand why Ofcom have chosen to clamp down on it, even if it did take a bit too long.

We should add that not all communication providers play the mid-contract hikes game. A good number of ISPs, particularly smaller players and many alternative networks, often adopt much more static pricing that rarely changes.