Staffordshire-based mobile phone retailer Phones 4u has promised to shape up sales practices after a rap on the knuckles by regulator Ofcom.
Following a six-month joint investigation by Ofcom and Staffordshire Trading Standards prompted by a “large number” of complaints of mis-selling, Newcastle-under-Lyme-based Phones 4u was found to have broken several consumer protection laws including the Sale of Goods Act.
Among the breaches, Phones 4u was found to have made “misleading, false or deceptive representations or omissions to consumers about matters such as network coverage, or what was included in their mobile phone plan.”
The investigation found the retailer did not give customers a refund when they returned faulty handsets within a reasonable period and included unfair terms in its handset return policy.
Ofcom said it had received “legally-binding undertakings” from the retailer promising changes relating to the sale of mobile handsets and contracts.
A spokeswoman for Ofcom described Phones 4u’s practices as “very bad” but added the company had taken action to change its consumer policies.
These included making changes to its handset return policy and other sales practices relating to network coverage, mobile plans and cancellation rights and upgrade.
Ofcom said Phones 4u co-operated fully, leading to a substantial reduction in complaints.
The regulator, with Staffordshire Trading Standards, will monitor complaints about Phones 4u to make sure it fulfils the promises.
Phones 4u said it was “pleased the investigation has reached a satisfactory outcome, following a constructive and collaborative process. The investigation primarily focused on failings in the Phones 4u process of repairing faulty handsets. The large majority of these were already known to the company and Ofcom has recognised the company was rectifying them.
“This process involved a change in the outsourced supplier, which unfortunately took some months. However, the new repairs service is now fully operational. In addition, the company discussed other areas with Ofcom, which resulted in minor changes to chequeback and other processes.
“Phones 4u has given Ofcom undertakings to ensure similar issues do not rise again. We feel this matter has now been fully resolved. Phones 4u continues to strive to provide an excellent service for all its customers.”
It is the first time Ofcom has investigated a mobile phone retailer for mis-selling, which can include misrepresenting tariff terms and other items of mobile plans like free minutes and cashback deals.
Phones 4u is part of holding group MobileServ and was acquired by Providence Equity and Doughty Hanson in 2006 from the Caudwell Group for a sum of £1.46 billion. Phones 4u was originally founded by John Caudwell in the 1980s as Midland Mobile Phones with his brother Brian.
Although the company didn’t make money for the first few years, by the late 1980s, the business sold £1 million worth of products and doubled in size every year until 1995.
In autumn 2003, the group sold mobile service provider Singlepoint to Vodafone for £405 million, and around this period Phones4U was the fastest growing company in Britain for two consecutive years.
It currently employs approximately 5,700 people and operates around 440 retail stores.