Investigation into Phones 4U Limited regarding allegations of misconduct in the retail selling and marketing of telecommunications goods and services

10 November 2008

Complainant: Ofcom own-initiative investigation, in collaboration with Staffordshire Trading Standards
Complaint against: Phones 4U Limited (“Phones 4U”)
Case opened: 13 May 2008
Case closed: 10 November 2008
Issue: Whether Phones 4U has breached any relevant consumer protection legislation
Relevant instrument: Part 8 of the Enterprise Act 2002

Ofcom’s investigation into Phones 4U has identified evidence that Phones 4U has engaged in conduct which Ofcom considers breaches consumer protection legislation and is likely to harm the collective interests of consumers, specifically by:

  • operating a policy which restricts or excludes consumers’ rights and remedies under the Sale of Goods Act 1979, including not providing the option of a replacement handset after 28 days and failing to effect a repair within a reasonable time and thereby causing significant inconvenience to consumers;
  • using terms contained in their handset return policy that are unfair and contrary to the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999;
  • using terms contained in their chequeback scheme that are unfair and contrary to the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999; and
  • making misleading, false or deceptive representations or omissions to consumers in breach of the Control of Misleading Advertising Regulations 1988.

As part of its investigation, Ofcom, together with Staffordshire Trading Standards, issued questionnaires to consumers identified from Consumer Direct’s database who had made complaints against Phones4U. Ofcom received a significant number of responses and the analysis of these revealed evidence of conduct by Phones 4U that Ofcom considered to be in breach of consumer protection law.

As required under the Enterprise Act 2002, Ofcom engaged in consultation with Phones 4U to end the identified infringements and to ensure that there would be no repetition of the infringements in the future. The outcome of this consultation is the commitment by Phones 4U to undertakings to comply with the law.

Through these undertakings, Ofcom has secured:

  • changes to Phones 4U’s handset return policy which have addressed the restrictions imposed by Phones 4U on consumers in relation to the rights and remedies available to them under the Sale of Goods Act;
  • changes to Phones 4U’s chequeback terms and conditions, which have addressed imbalances identified by Ofcom in the rights of consumers and the obligations of Phones 4U; and
  • commitments from Phones 4U in relation to its sales practices, in particular, the making of representations and omissions to consumers regarding network coverage, contract buy out offers, mobile plan characteristics, “unlimited” internet usage, cancellation rights and upgrades.

Phones 4U has cooperated fully during the investigation and implemented changes to its staff training procedures and operations. Phones 4U has committed to continuing its close working relationship with Staffordshire Trading Standards to ensure compliance with the undertakings going forward.

Having secured outcomes for consumers that are consistent with Ofcom’s statutory duties, Ofcom has now closed its investigation into the activities of Phones 4U.

Should concern arise regarding complaint levels in respect of Phones 4U and its compliance with the undertakings, Ofcom will consider taking further enforcement action.

Text published when the case was opened

Ofcom has opened this investigation following receipt of a large number of complaints from consumers, to both Consumer Direct and Ofcom’s Advisory Team, concerning a range of issues, including mis-selling, by Phones 4U, an independent mobile phone retailer.

Ofcom’s investigation will consider whether Phones 4U has engaged in conduct which infringes any relevant law and harms the collective interests of consumers.

Case Leader: Miriam Martin ( e-mail: miriam.martin@ofcom.org.uk)
Case Reference: CW/00985/04/08