On 17 July 2008, the European Commission announced the results of the second EU consumer protection enforcement sweep, this time into websites offering mobile phone services such as ring-tones and wallpapers. The sweep, which covered more than 500 websites across the 27 EU Member States plus Norway and Iceland, revealed suspected breaches of EU consumer protection rules on 80 per cent of the sites checked. The main problems were: i) unclear price information, typically where prices were incomplete, did not include taxes, or customers were unaware that they were signing up to a subscription; and ii) failure to provide the required contact information about the trader. Other problems related to misleading information, including key information being hidden in very small print or on obscure parts of the website, or the use of the word “free” to draw consumers into long-term contracts.

The sweep will now enter its second phase, during which national authorities will investigate those websites flagged as “having irregularities” and take appropriate action to ensure that non compliant sites are corrected or closed. Several countries, namely Finland, Greece, Iceland, Latvia, Norway, Romania and Sweden have already “named and shamed” websites that have been found to have irregularities.

BACKGROUND

This latest sweep is being conducted in the same way as the inaugural sweep against airline websites that revealed widespread unfair pricing practices. Member State authorities carry out simultaneous, co-ordinated checks of web pages for breaches in consumer law. During an enforcement phase, they contact the operators to point out alleged irregularities and ask them to clarify their position and/or take corrective action. The mobile services sweep took place between 2 and 6 June 2008 and checked 558 websites for suspected violations of EU consumer law. In particular, the Unfair Commercial Practices Directive (2005/29/EC) (UCPD), the Distance Selling Directive (1997/7/EC) and the E-commerce Directive (2000/31/EC).

The UCPD is designed to ensure that traders display in a clear and intelligible way all the information that consumers need to make an informed choice. It also bans aggressive sales techniques, deceptive or misleading advertising or marketing and blacklists 31 commercial practices that will always be considered unfair including misleading use of the word “free”. The Distance Selling Directive sets out minimum information requirements for online traders, including the identity of the supplier, main characteristics of goods, complete price (including taxes), period of subscription, duration of the contract and, where applicable, the right to cancel. The Ecommerce Directive provides for additional information requirements concerning the details of the service provider, including its email address.

FINDINGS

The latest sweep focused on three types of practices in the mobile services sector that compromise consumer rights, namely unclear information about the offer’s price, trader information and misleading advertising. Of the 558 websites checked, 466 have been earmarked for further investigation. In other words, a staggering 80 per cent of mobile services websites are potentially in breach of basic consumer protection legislation applicable to online trading. Of these, 76 have a cross-border dimension and will be investigated by enforcement authorities in the respective Member States via the Consumer Protection Co-operation Network. In the United Kingdom, 39 out of 43 websites have been flagged for follow up action.

As ring-tones and wallpapers are particularly popular with children and young people, national authorities homed in on sites targeting (partially or exclusively) these groups. These amounted to 50 per cent of the websites checked and, according to the Commission, there is evidence that websites target children to take advantage of their lack of experience. These sites were identified by, for example, the use of children’s cartoon characters, well known TV characters, or the fact that parental consent was required. The sweep found that the same high level of irregularities, 80 per cent, also applied to these sites.

Many websites had multiple irregularities and almost 50 per cent of all the sites checked had some irregularity related to the information about the offer’s price. On many websites prices and related charges and fees were not clearly indicated or not referred to at all—until they appeared on a phone bill. Pricesdid not include all taxes, and in the case of a subscription, the word “subscription” was not clearly mentioned or the period of a subscription was not clear.

Additionally, over 70 per cent of websites lacked some of the information required to contact the trader. This is in breach of the E-commerce Directive, which requires details of the service provider, including an email address, to be displayed.

Finally, 60 per cent of websites presented the information in a misleading way. In these cases, information on the contract was available on the site but hidden in small print or was hard to find; or goods and services were advertised as “free” only for the customer to find that there were charges or that he was tied to a contract.

COMMENT

Companies behind the non compliant sites will now be contacted by the national authorities and asked to put things right. If they don’t, they may face fines and/or closure of their websites. As the European Commission admits, however, tracking some of these companies down will not be easy. Of those on the consolidated name and shame list, for example, a fair proportion appears as “not known”. The Commission and national authorities face a Sisyphean task in controlling unlawful practices in the burgeoning market for mobile services, which, as well as ring-tones and wallpapers for mobile phones, includes, for example, subscriptions to chat services, phone games, logos and so on. These are all widely advertised and sold online, or through any other media that is likely to appeal particularly to the young.

The clear message for all traders is that websites selling products and services must ensure that all elements of the price, including taxes, are clear. This includes information tying the consumer to a long term subscription. Additionally, there should be clear contact information available through the home page in order to comply with the information requirements of the Distance Selling Directive and the E-commerce Directive. Unfortunately, in this respect, many legitimate companies avoid placing clear contact information on their sites in order to cut down administrative costs or to prevent spam and other attacks on the service. That, however, does not mean that they are not in breach. In the particular case of mobile phone services, the use of the word “free” to draw consumers into signing up to services that are anything but, is a clear breach of the UCPD and, of course, a criminal one at that.