Increasingly Popular Premium SMS Services Lead to Complaints

Surely you know the colour of the Australian $10 note? You probably have one in your wallet. But the Australian Competition and Consumer Commission argues this high-rotation television advertisement and others like it mislead viewers. While the quiz might have seemed like an inexpensive and entertaining diversion, quiz entrants were actually charged a $5 joining fee, sent up to 10 subsequent quiz questions at a cost of $5 each, and received an ongoing subscription of six $5 SMS messages each month. And, after shelling out $85 during their first month, curious participants might have read the terms and conditions to discover that no resident of Queensland, Victoria or the Australian Capital Territory was eligible to win the prize anyway.

The “Text and Win” Mac Air advertisement is one of three TV ads by TMG Asia Pacific that are subject to an ACCC lawsuit. The ACCC alleges the ads failed to disclose the true cost of the competitions and is seeking injunctions against TMG, corrective advertisements and a declaration that TMG engaged in false, misleading and deceptive conduct. The case is set for a directions hearing in the Federal Court on October 1. TMG declined to comment on the proceedings.

But this case is just one example of high-cost, premium SMS services in Australia; services that are becoming increasingly popular and an increasing target for complaints. These services attracted almost 6000 complaints to the Telecommunications Industry Ombudsman in the first three months of 2008 – more than any other facet of mobile phone use, including billing, contracts, faults and customer service.

Even members of the mobile phone industry admit premium SMS services are a concern and are currently “toughening up” the industry code of conduct. But ACCC chairman Graeme Samuel says the industry has taken too long to act, forcing the competition watchdog to take a hard line on these services.

Samuel says most premium SMS services, from games of skill to ringtone offers, are not illegal but their advertisements can be deceptive and do not make the full cost of services clear. Pricing is often hidden in small print at the bottom of a busy television advertisement, which Samuel says is “not difficult, but impossible” to read.

As these services often target young, inexperienced phone users, he says, it’s not surprising many feel stung when they receive subsequent high phone bills. “Many consumers have reported to the ACCC that they were not fully aware of the costs of the services until they received their first bill or found they had used up all their pre-paid credit,” Samuel says.

Competition specialist Craig Seitam says it is a complaint he hears regularly, with many participants finding they have been charged $60 or more before they can stop it. “If you think about your monthly mobile phone billing cycle, if you’re being billed on the 20th of every month and you send a message on the 21st, it could be six weeks down the track that you find out about these charges,” he says. “Also, if you’re addicted to entering competitions you’re not going to be entering just one of them.”

Ban SMS quizzes call Seitam, who runs http://www.shoppersbonus.com.au/, also says the profit margins on these competitions are so large, premium SMS companies have offered him a commission of $5 to $6 for every new member referred from his site. “They need to be banned or at least much more heavily regulated,” he says.

These mobile phone services are currently self-regulated with a code called the Mobile Premium Services Industry (MPSI) scheme that was approved by the Australian Communications and Media Authority in September 2006. This code includes guidelines about the classification of content, the availability of a complaints procedure and the display of each service’s nature and price in advertisements. The code has seen compliant companies including Jamster set up 24-hour helplines and methods to block phone numbers from service subscriptions. But Australian Mobile Telecommunications Association chief executive Chris Althaus admits the scheme has “shortcomings”. What to look for:

* Find the service’s fees in its terms and conditions

* Determine whether you are paying for a one-off service or an ongoing subscription

* Consider whether you will incur extra download charges

* SMS “stop” to the number in question to unsubscribe

* Complain to your phone carrier if you have been charged unfairly

* Complain to the ACCC, TIO or ACMA if unsatisfied with the response