SIMs: Suitable Information Mollifies Subscribers?

September 13, 2018

In 2012, the Italian competition and consumer protection authority,
Autorità Garante della Concorrenza e del Mercato, penalised two Italian
telecoms operators for marketing SIM cards ‘with pre-loaded and pre-activated
functionalities, such as internet browsing services and voicemail services, the
use of which was charged to the user if they were not deactivated at his
express request, without that user having been informed in advance of the
existence of those services or of their cost.’

was asked to rule on whether this activity amounted to an aggressive commercial
practice, prohibited under EU consumer protection law, and whether specific
rules in the telecoms regulatory framework trumped the general rules on
consumer protection.

Telecoms law does not trump consumer protection

Let’s get the easy bit out the way up front. There are
specific rules in the telecoms sector which require Member States to ensure
that operators provide a contract which specifies ‘in a clear, comprehensive
and easily accessible form’ certain information, as well as provide certain
transparency information — this is set out in Articles 20 and 21 of the
Universal Service Directive. In the UK, this is implemented through C1.2 of the
new General Conditions of Entitlement.

One of the arguments put forward was that, since there are
specific rules requiring operators to publish certain information, that this
should be taken as lex specialis, overriding the more general obligations under
the directive on unfair practices.

The CJEU was unpersuaded by this, and the argument was
certainly not aided by Article 1(4) of the Universal Service Directive, which
provides that ‘[t]he provisions of this Directive concerning end users’ rights
shall apply without prejudice to Community rules on consumer protection

The outcome is that operators must ensure that they comply
with Ofcom’s General Conditions, in terms of the provision of information, and
also ensure that their behaviour does not amount to an unfair commercial

Was the operators’ approach an unfair commercial practice?

Unpicking what the CJEU considered to be the unfair
commercial practice is a little difficult.

The court’s description of the issue is:

‘the sale of SIM cards on which internet browsing services
and voicemail services had been pre-loaded and pre-activated, the fees for
using those services being charged to the user if the services were not
deactivated at the user’s express request, without the user having been
sufficiently informed, in advance, of the fact that those services had been
pre- loaded and pre-activated, nor of their cost.’

The description of something — especially services — being ‘pre-loaded’
on SIM cards makes no real sense, even back in 2012 when the original
enforcement decision was taken by the Italian regulator.

My interpretation is that a consumer had bought a SIM which
enabled them to access a voicemail facility and to use data services to access
the Internet. However, it appears that the operator had not told them that
these facilities were enabled by default, nor the costs associated with them.

The CJEU does not make clear whether the costs in question
were costs associated with a subscription (ie a facility for accessing the
Internet, or using voicemail) or for the incremental costs of such usage, such
as the cost of data transfer if someone used an Internet connection.

Since the court states that ‘from the moment those SIM cards
are first inserted into a mobile telephone or any other device allowing
browsing on the internet, the internet browsing service could even result in
connections without the user’s knowledge, inter alia by means of “always on”
and that ‘the internet browsing service could have caused
internet connections to be made without the consumer’s knowledge, incurring
fees without the consumer being aware of that fact’,
it seems that the court
had the incremental cost of usage in mind.

Apparently, according to the court, ‘[i]t is not clear that
the average buyer of a SIM card might be aware’
that, if they buy a SIM and pop
it into their phone, they might incur fees relating to Internet usage, and that
an operator’s failure to tell a customer about the presence of these services,
or inform them of the costs, amounted to an unfair commercial practice, since
the customer could incur fees without knowing that this was happening.

The court held that it was no defence that a customer could
have configured their phone not to make connections to the Internet, or not to
dial voicemail, or that the customer could have opted for deactivation of the
services in question — a reasonable finding if the customer did not know about
the services, and did not know that use would incur costs.

Given all of this, the CJEU held that the operators had
engaged in an unfair commercial practice of ‘inertia selling’.

Key points for operators

The key points for operators are:

  • compliance with the General Conditions is a requirement but,
    on its own, it does not prevent sales techniques from amounting to unfair
    commercial practices; and
  • operators cannot presume that a customer will know what
    services a SIM might enable a customer to access.

To avoid a complaint that sales techniques amount to unfair
commercial practices, operators must describe the services which the SIM lets a
customer access by default before point of sale, along with information about
costs of those services.

This is particularly important, since the UK’s Consumer
Protection from Unfair Trading Regulations 2008 contains a number of criminal
offences, including an offence of engaging in a commercial practice which is a
misleading omission — failing to provide material information which is likely
to cause the average consumer to take a transactional decision they would not
have otherwise taken — or engaging in an aggressive commercial practice. The
maximum penalty is a fine or imprisonment for up to two years.

If the offence was committed with the ‘consent or connivance’
of a director or other officer of a company, that person is individually guilty
of the offence, as well as the company.

Similarly, operators which have not historically provided the
necessary information could face challenges for consumers for reimbursement of
fees paid for the services in question, under the ‘right to damages’ in the

However, as this is a CJEU decision on the application of EU
law, it would be for a domestic court to determine whether any given situation
amounted to an unfair commercial practice.

Neil Brown runs decoded:Legal, a telecoms, technology and
Internet law firm.