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Netherlands Consumer Authority fines provider of sms-services

The Netherlands Consumer Authority is imposing fines amounting to a total of EUR 1,190,000 (one-million-one-hundred-and-ninety-thousand euro) on Artiq Mobile B.V. and Blinck International B.V. - trading under the name of Celldorado - for the large-scale provision of misleading SMS services to consumers. The Consumer Authority is also imposing various orders for incremental penalty payments on the company, in order to ensure that it does stop the misleading practices in question. The SMS services (games and wallpapers) in question were brought to the attention of consumers via the Internet and TV. Consumers believed that they were doing a one-off test or game but had actually subscribed to an SMS service, without intending or wanting to do so. The misleading Internet and TV publicity meant that the subscription element was concealed.

Bernadette van Buchem, Director of the Consumer Authority: "Efforts to tackle misleading SMS services are back on our agenda this year, since many consumers - both younger and older consumers - are still being duped by these practices. On its website, Celldorado claims that it observes the SMS Service Provision Code of Conduct (SMS Gedragscode), but it has emerged that this is not in every aspect the case. This decision is intended to send a clear message, both to other companies offering these services and to consumers."

National and international

The Consumer Authority started this investigation for a number of reasons, including the large number of complaints that ConsuWijzer received from consumers. One consumer complained as follows: "I think I've made a mistake. I wanted to do the love test for a bit of a laugh. But I think that I've now automatically taken out a subscription. If I have, I want to cancel the subscription straight away!". The Consumer Authority also received various international enforcement requests from countries in which the company is operating, including Germany, Norway and Portugal. Consumers in these countries also felt that they had been misled by the practices adopted by Celldorado. In the past, the Netherlands Consumer Authority has already submitted various complaints about publicity used by the company to both the Advertising Code Committee (Reclame Code Commissie) and the Foundation for the SMS service provision code of conduct (Stichting SMS Gedragscode).

Investigation and findings

In the period from April 2009 until the beginning of 2010, the Netherlands Consumer Authority investigated the Internet and TV campaigns launched by Celldorado for SMS services like Friend Finder, "Beest in Bed", "Ware Liefde", Love Test, Brain Age and IQ test. The investigation revealed that Celldorado has broken various rules that have been put in place to protect consumers. For example, the Netherlands Consumer Authority established that, amongst other things, the company:

  • Misleads consumers by failing to provide them with sufficient information about the most fundamental characteristics of the product. For example: consumers are subscribing to a service, what it costs, how many items they will receive every week and how to dissolve the agreement. Nor is any information provided on the fact that some mobile phones are not able to display all of the various applications;
  • misleads consumers in its Internet and TV publicity by withholding fundamental information about the service offered. Consumers believe that they are receiving the results of a test or game by SMS, but are actually taking out a subscription to an SMS service by entering 'OK';
  • is failing to comply with the information obligations that apply for companies that offer products and services via the Internet. Celldorado fails to state essential information, or does this insufficiently. This information includes who the provider is, where it has its registered office, how to cancel the service and who to approach with complaints.

Fine

The Netherlands Consumer Authority is imposing fines amounting to a total of € 1,190,000 on Celldorado. Based on the Unfair Commercial Practices Act (Wet Oneerlijke Handelspraktijken), the Netherlands Consumer Authority is able to impose fines of € 450,000 per violation. Fines can be added up where a number of violations apply.

As the company claims that it wants to play a leading role in the industry, the Netherlands Consumer Authority feels that this is a very serious matter indeed and is responding accordingly. Besides the fine, the orders imposed are intended to force Celldorado to make sure that its conduct is in line with the rules applicable in the short term, not just in the Netherlands, but also in the other European countries in which the company operates.

Celldorado has now lodged an objection against the decision of the Netherlands Consumer Authority.