Service provider fined £50,000 for misleading consumers over app charges

Out-Law News | 04 Sep 2012 | 2:39 pm | 1 min. read

A premium rate service (PRS) provider has been fined £50,000 after the industry's regulator ruled that it had charged mobile phone users to download a games application without adequate consent to do so.

PhonepayPlus (PPP) deemed Connect Ltd (Connect) to have breached four rules of its Code of Practice. It said that Connect had provided "inaccurate" information to UK users of its service and that it had not obtained consumers' consent to the charges. The Connect service was "misleading", the regulator said. It ordered the company to refund all the consumers that used the service.

PhonepayPlus had received ten complaints about Connect's service, which charged users £10 to agree to the installation of the gaming app or £10 if they selected to 'agree' to the rules of downloading. However, a Tribunal found that the rules did not display true information about the pricing regime and therefore deemed that "that consumers were not notified in advance of the charges."

More than £100,000 in revenue was generated from consumers that had downloaded the app, although PPP said it did not know how much Connect had itself made from its part in delivering the service.

"The Tribunal considered the case to be very serious and issued a formal reprimand, a fine of £50,000 and a requirement for [Connect] to submit all premium rate services to PhonepayPlus for prior permission for two years and a requirement that [Connect] make refunds, within three months, to all consumers who have used the service for the full amount spent, regardless of whether or not they have claimed a refund," the Tribunal's adjudication said.

During the course of its investigations PPP discovered that Connect had not registered the fact it was providing premium rate services, despite the fact it was supposed to under the Code of Practice.

Under the Code PRS providers are also supposed to display the cost of using a service to consumers prior to them making a purchase. This information must be "prominent, clearly legible, visible and proximate to the premium rate telephone number, shortcode or other means of access to the service," the Code states.

Premium rate services must not mislead or be likely to mislead in any way and consumers must not be charged for premium rate services without having given their consent, the Code also states.

Last year PPP said that some makers of mobile phone apps were secretly charging phone users for services they never asked for.

The regulator has issued guidance advising that clear information must be provided to consumers to enable them to decide whether to purchase a PRS app. In addition services which combine free and paid-for elements must also be clear what is free and what is not; whilst certain details about virtual currencies, which can be used for purchasing, such as their worth and the date of expiry, must also be clearly displayed, the guide states.

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