Virgin Media Faces Scrutiny over Broadband Contract Terms
Virgin Media, a major player in the UK telecom industry, is under increasing pressure as a consumer advocate Which? raises urgent concerns regarding the legality of its broadband contracts.
The contracts in question grant Virgin Media the power to increase bills without defined limits or frequency.
Allegations of Unfairness and Breach of Consumer Rights Act
Which? has taken a strong stance, suggesting that Virgin Media’s contractual terms might constitute unfair practices and could potentially violate the Consumer Rights Act. Responding to these allegations, Virgin Media has vehemently denied the accusations as unfounded.
Lauren Davies of VoIP company bOnline comments: “Companies of all nature need to be so careful when it comes to potentially misleading customers and when engaging consumers into fixed or indeed variable contracts. The general public is more clued up than ever on consumer affairs. This is a good thing as it means that consumers should get a good deal whilst companies and providers need to up their game to compete.”
Hidden Clause Sparks Imbalance in Consumer Rights
A central issue highlighted by Which? revolves around a less-prominent clause within Virgin Media’s intricate terms and conditions. This clause affords the company the ability to impose significant price hikes during a contract, correlating with inflation rates. Furthermore, this change denies affected customers the option to terminate their contracts without paying substantial exit fees, creating an imbalance between the company’s authority and consumer rights.
Widespread Price Increases Trigger Concerns
In a specific incident in April, Virgin Media customers faced a daunting average increase of 13% in their bills, translating to over £100 yearly for households subscribed to premium packages. However, this trend is not unique to Virgin Media; the majority of telecom providers have similarly raised prices in response to soaring inflation, leading to accusations of “greedflation.”
Shift in Terms and Conditions: Inflation-Linked Hikes
Attempting to address the situation, Virgin Media revised its terms and conditions in May. The company introduced a clause dictating that customers would experience yearly price hikes linked to the retail price index (RPI) inflation measure. This move deviates from the norm within the industry, where most operators utilise the consumer price index (CPI), a more conservative inflation measure.
Controversial Surcharge Amid High Inflation
Virgin Media compounded the situation by implementing an additional 3.9% surcharge alongside the annual inflation-linked increase. Critics argue that justifying this surcharge during a period of rampant inflation is challenging.
Which? Appeals to Ofcom for Urgent Action
At the heart of Which? ‘s complaint lies a long-standing provision in Virgin Media’s terms and conditions that grants the company the liberty to modify charges at its discretion. This implies that customers could potentially face multiple price hikes throughout their contracts, and given current inflation rates, these hikes could be substantial.
Potential Unlawfulness and Call for Investigation
Rocio Concha, Director of Policy and Advocacy at Which?, asserts that Virgin Media’s approach of implementing high inflation-driven price hikes while retaining the power to raise bills arbitrarily is not only unacceptable but possibly illegal. Concha calls on Ofcom to initiate a prompt investigation, emphasising the need to curtail unjustifiable mid-contract price increases linked to inflation.
Guidance from the Competition and Markets Authority (CMA)
Concha’s stance finds support in the guidance provided by the Competition and Markets Authority (CMA), which deems “any purely discretionary right to set or vary a price after the consumer has become bound to pay is objectionable.”
Virgin Media’s Response and Ongoing Issues
Virgin Media counters the allegations by asserting that it has consistently communicated price increases transparently. The company clarifies that it has notified customers well in advance about the introduction of inflation-linked changes, affording customers the option to cancel contracts within a 30-day window upon receiving the notification.
This controversy compounds recent troubles for Virgin Media, including a substantial outage of its email systems that left numerous customers without email access for prolonged periods.
Ofcom’s Commitment to Addressing Concerns
Ofcom responds to the situation, expressing its preparedness to tackle the raised concerns. The regulator acknowledges an ongoing enforcement program aimed at assessing telecom companies’ compliance with rules mandating transparent communication with customers of mid-contract price increases. Additionally, Ofcom is scrutinising whether inflation-linked increases provide customers with adequate certainty and clarity regarding their future payments, with an assurance to release reports on these matters later in the year.