Use of marketing terms such as capped, unlimited and free

The TIO regularly receives complaints about products/services that are marketed or promoted by companies as being “capped”, “unlimited” or “free”.

Complaints often arise when the words capped, unlimited or free are used in such a way that their meaning does not appear to be the same as their generally received (or “everyday”) meaning.

Core position

As a general principle, it is the TIO’s view that products should only be marketed as capped, unlimited or free when those products are in fact capped, unlimited or free in the everyday sense of those words. Companies may confuse consumers if they use these terms in another sense, either directly or indirectly such as through qualifying contractual terms and conditions.

This position statement discusses each term individually then sets out the TIO’s general approach to complaints involving the terms, including possible complaint resolutions.

Note: should complaints arise in the future about similar terms, the TIO will adopt the general approach set out in this position statement when investigating.

Discussion of specific terms

Capped

Recent years have seen many telecommunications providers market products they describe as capped plans. Such products generally involve an arrangement where a consumer pays a fixed—usually monthly—amount to obtain service value for what is stated to be a higher amount, e.g. a customer agrees to pay $50 per month so they can make calls up to the value of $300.

Contractual terms and conditions for such plans vary considerably, even when they are plans offered by the same company.

Some of the claims made by complainants about capped plans include:

• that they were not aware that they would have to pay more than the fixed monthly payment if their usage exceeded the value associated with the cap, e.g. that they would have to pay more than $50 if they made calls beyond $300
  
  
• that they were not aware that the arrangement did not include all types of usage, e.g. that if they made data calls to access the internet they could not count these as part of their $300 in value and instead would have to pay for them separately at the rate of $2.50 per minute, and/or
  
  
• that they were not aware that the arrangement set limits on the duration of individual calls, and that they would have to pay separately for any calls that were longer than a defined period.

These and other complaints indicate that consumers may not clearly understand what capping means in the specific context of a plan for telecommunications services. Rather, they appear to understand the term capped in the generally protective sense of the term, i.e. that there is a maximum limit or “ceiling” on the amount of money that they can spend or that they will be charged.

In other complaints to the TIO, consumers have claimed that they have experienced difficulty in monitoring their expenditure so as to be sure how much—if any—of the value allocated by the plan is left to use in the current billing cycle, e.g. how much of their $300 call value they have already used and how many calls they can still make for the rest of the month.

Unlimited

The TIO receives complaints where a customer has acquired a telecommunications product (most often an internet product) which has been marketed as having unlimited usage, only to find that the product is subject to an Acceptable Use Policy (AUP) which imposes limitations on usage.

Complainants claim either:

• that they were not advised about the existence of an AUP at the point of sale, or
  
  
• that the terms of the AUP were not clear enough at the point of sale for them to determine the likely effect of those terms on their usage before they agreed to enter the contract, or
  
  
• that their provider has introduced an AUP during the course of their contract for a plan which was marketed as unlimited.

Examples of complaints about the use of the term unlimited include:

• a complaint about an internet plan promoted as unlimited which restricts the speed of a connection after usage reaches 10Gb
  
  
• a complaint about an internet plan promoted as unlimited with terms and conditions which prevent a user from using peer-to-peer software (a high-usage application), or prevent a user from running high-usage software when they are not actually physically present at their computer.

These and other complaints indicate that consumers generally understand the term unlimited to mean:

• boundless or infinite use of a service, and/or
  
  
• unrestricted use of a service, and/or
  
  
• the absence of conditions or exceptions which qualify usage of the product/ service.

Free

Complaints about products marketed as free may involve one-off or ongoing offers.

Some examples of free offers are:

• One-off: a consumer accepts a free mobile telephone handset but subsequently learns that they have been placed on a minimum term contract for carriage services.
  
  
• Ongoing: a business consumer enters into a telephone contract on the basis of verbal representations that PABX-type equipment will in effect be free because they will receive credits equivalent to the monthly rental of that equipment. Subsequently, the consumer finds that they are bound to a separate fixed-term PABX rental contract and that they will lose credits for call charges equivalent to that rental if they transfer to another provider for carriage services or exit the telephone contract in some other way.

In the TIO’s experience, such complaints indicate that consumers generally understand the term free to mean that a product/service will be:

• provided without charge or not subject to a charge or payment, and/or
  
  
• given without consideration of a return or reward, and/or
  
  
• unattached from any condition.

Investigation of complaints involving the use of marketing terms

When the TIO receives a complaint that involves the use of marketing terms, such as capped, unlimited and/or free, the TIO may consider:

• the way the product has been promoted—including the target market for the product, and the overall impression generated by any promotional strategy and materials
  
  
• the terms and conditions of the product (including any explanation of pricing)
  
  
• the comprehensibility and level of complexity/intricacy of the product’s terms and conditions
  
  
• any oral information given to the customer at the point of sale
  
  
• any qualifying information for the product
  
  
• how any qualifying information was communicated to the customer, including the prominence given to any qualifying information
  
  
• whether the use of any term conveys a false impression, and/or whether the use of any term is or may be misleading and/or deceptive; and

where relevant:

• whether the provider offers a mechanism by which a customer is able to monitor their level of expenditure/usage
  
  
• whether the provider has made the customer aware of the monitoring tool and the need for them to use it
  
  
• the accuracy/usability of any monitoring tool, including how often the provider updates usage
  
  
• what action, if any, the provider has taken to notify a customer that they are about to or have reached a limit, and
  
  
• what, if any, information the provider has given to the customer about what happens after they reach a limit.

For plans marketed as capped, the TIO may also consider whether it was reasonable in the circumstances of the complaint for the customer to believe the product included a ceiling on the amount the customer could be billed.

For products marketed as free, the TIO may also consider whether that product is subject to any charge, fee or cost; and/or, where there is an offer that includes a free product, whether the price of any other product that forms part of that offer has been inflated to cover the cost of the free product.

Telecommunications Industry Codes

The TIO also considers Chapter 4 of the Telecommunications Consumer Protections Code when investigating complaints about the use of marketing terms. This Chapter is about Customer Information on Prices, Terms & Conditions.

Possible resolutions to complaints involving the use of marketing terms

If, after investigating a complaint, the TIO finds that a provider gave a customer inadequate or misleading information about the terms and conditions of a product marketed as capped, unlimited or free, the TIO may direct a provider to:

• waive any excess charges
  
  
• release the customer from their contract, and/or
  
  
• take appropriate action to ensure that a customer is no worse off financially.

First posted: 25 September 2006