Are escalating Broadband Bills a Fair Contract?

IamNotAllowedToUseMyName

Virgin Media, in common with other phone and broadband suppliers have changed their contract so that as of April, we are to be locked into an escalating price contract of RPI + 3.9% per annum, with a minimum price increase per annum of 3.9%

While escalating prices have been a feature of supposed fixed price contracts for a while, it strikes me that VM are trying to create conditions where they can put in annual price hikes while taking away the right to cancel the contract without penalty which they currently have to give under their existing contract.

My question is: is forcing a consumer to agree to an escalating price clause a fair contract?

There is a further issue about VMs unfair practices in that they will generate a new contract start date just about every time you interact with them.

Fortunately I probably have an escape with a 3rd(!) cable supplier laying cables past my property so have a solid negotiating position when that is launched, but it strikes me that an escalating price contract is both an unfair contract, and I suspect that there is a complex monopoly in play as I suspect that all phone and broadband suppliers are adopting these practices.

https://www.gov.uk/unfair-terms-in-sales-contracts/unfair-consumer-contracts#:~:text=If a customer complains,using unfair terms or notices.

Your contract terms might also be unfair if they weigh the contract significantly in your favour, eg:

• by providing for excessive cancellation charges and automatic loss of all upfront payments

• by creating unbalanced rights, eg being able to cancel a contract at any time, but requiring the customer to give 3 months’ notice

• by allowing you to increase the agreed price at a later date

Your contract won’t be unfair just because it sets a price that’s higher than another business charges.

(Edited to correct % additional increase)

prowla

Well, despite the fact that it's galling, you do sign up to those T&Cs and you have a choice to go elsewhere.

What especially gets me is the notifications which gleefully say they're complying with the Government's rules - no, the Government don't say you have to increase by the maximum permitted.

Me, I've just ditched Sky BB because I was running two services and I've just dropped back to Virgin (Gb) only.

There's been a fibre company laying its cables along our street, so then I'll have another option next time around.

Money_Grabber13579

prowla said:

Well, despite the fact that it's galling, you do sign up to those T&Cs and you have a choice to go elsewhere.

What especially gets me is the notifications which gleefully say they're complying with the Government's rules - no, the Government don't say you have to increase by the maximum permitted.

Me, I've just ditched Sky BB because I was running two services and I've just dropped back to Virgin (Gb) only.

There's been a fibre company laying its cables along our street, so then I'll have another option next time around.

But just because something is in the T&C’s doesn’t make it not unfair. I suspect that when the increases were limited c.5%, people just rolled over and accepted it but when the increase is now 15% per year, that’s a significant hike over the price originally agreed. My view is that if the providers want to lock people into long fixed term contracts, they need to accept the risk that comes with that whereas at the moment, everything seems tilted in the broadband providers favour.

molerat

They are only fair because the push over OFCOM allowed the providers to get away with it.  What were they thinking ?  Do you think OFGEM would have got away with allowing the same.

IamNotAllowedToUseMyName

prowla said:

Well, despite the fact that it's galling, you do sign up to those T&Cs and you have a choice to go elsewhere.

What especially gets me is the notifications which gleefully say they're complying with the Government's rules - no, the Government don't say you have to increase by the maximum permitted.

Me, I've just ditched Sky BB because I was running two services and I've just dropped back to Virgin (Gb) only.

There's been a fibre company laying its cables along our street, so then I'll have another option next time around.

After many many decades of consumer law, it is disappointing to see that so many people don't understand the basic principles of unfair contracts. If a term in a contract is deemed unfair, that whole term is struck out. They can quote it and you can say you should have read it, but there are several things which are deemed inherently unfair. It is not even for OFCOM to declare it is OK, ultimately it is for the courts to decide. Before you ever answer a question on fair contracts with "you should have read the T & Cs" please have a proper read of some guidance of Unfair Terms.

Here is a quick extract of some guidance relevant here.

1.17 Where there is any doubt as to what constitutes a term, it should be resolved having regard to matters of substance rather than form. It has been judicially recognised that a term is not limited to what is said in a particular numbered clause or paragraph in the contract. Rather, a term constitutes all the provisions in the contractual documentation which give rise to a particular obligation or right. It does not matter whether the obligation or right is found in a single clause, various paragraphs of the contract documents or in part of a clause.

1.31 A term or notice that is unfair is not legally binding on consumers. This does not prevent consumers from relying on it if they wish. The Act enables consumers to challenge wording if they consider it unfair and do not wish it to be relied upon as against them. If they make such a challenge, and the trader refuses to accept that the wording is unfair, they may wish to consider whether they have a legal case for taking matters further, with a view to seeking, for instance, to resist an apparently unfair demand, or to insist that the trader acts in a particular way. Before taking any steps that will, or may, involve resisting or taking legal proceedings, consumers should always seek legal advice.

1.32 There are certain exemptions from the fairness test. The main exemption is commonly called ‘the core exemption’ and relates to terms that specify the main subject matter of the contract or set the price – provided they are transparent and prominent. 

1.34 The Act also includes provisions under which certain terms (in Part 1 of the Act) and one kind of consumer notice (in Part 2) are automatically unenforceable – they are treated as inherently objectionable independently of the fairness assessment. In general these provisions reflect and continue the approach of the UCTA. For the purpose of this guidance, wording subject to this effect is referred to as having been ‘blacklisted’. 

5.23.3 Any term which can be relied on as a basis for varying the price should set out clearly the circumstances in which a variation may occur, and the method of calculating the price variation, so that the consumer can foresee, on the basis of clear, intelligible criteria, the alterations that may be made 106 and evaluate the practical implications for them.110 Similarly a price determination clause should clearly set out the information to enable the consumer to foresee what price will be payable depending on the circumstances.

5.23.4 A price clause is not necessarily fair just because it is not on its face discretionary. Using a term that, for example, gives a right to increase prices to cover any increased costs experienced by the trader fails to recognise that traders are much better able to anticipate and control changes in their own costs than consumers can possibly be. Such a clause is both unclear as to what the consumer can expect and open to abuse if (as will normally be the case) the consumer can have no reasonable certainty that the increases imposed on them actually match net cost increases.

5.23.5 A degree of flexibility in pricing is more likely to be achieved fairly in the following ways:

  Where the level and timing of any price increases are specified (within narrow limits if not precisely) they may effectively form part of the agreed price. As such they are acceptable, provided the details are clear and adequately drawn to the consumer’s attention before entering into the contract in a way which allows the consumer to foresee and evaluate the practical implications on them of the variation.

  Terms which permit increases linked to a relevant published price index such as the Retail Prices Index are likely to be acceptable, as Part 2 of Schedule 2, paragraph 25 of the Act indicates, subject to the same proviso as above.

  Any kind of variation clause may in principle be fair provided that, in line with what is said in paragraph 5.21.8 above, consumers are genuinely free to escape its effects by ending the contract, and that transparency criteria have been met so that they are able to make an informed choice whether to enter the contract in the first place. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/450440/Unfair_Terms_Main_Guidance.pdf

In this case VM have some weasel words about using the RPI declared in February so you have plenty of time to plan for the increase, but the ruse is to try and get out of free cancellation while allowing for massive price increases to comply with 5.23.3. However, the blanket 3.9% is a simple ratchet and does not relate to any costs incurred (see 5.23.4). I suspect that they are also attempting to work around 5.23.5 (clause 3) and attempting to remove the right to cancel without charge.

I hate all this shopping around malarky. I just want to have a reasonably priced service without having to spend a couple of hours on each thing I have a contract for to end up paying the same price.

In my case, I have an 18 month contract (which VM have not provided the wording for either by email or on their site - links just say not available) and now after about a year, they are fundamentally changing the terms and giving the choice of leaving or accepting an unfair contract. Leaving requires a full installation of an alternative service, one of which does not start for another few months.

user1977

If you can break the contract without penalty, that's all that is required - the fact it might be inconvenient to arrange an alternative supplier doesn't come into it.

And if you are entitled so to break the contract - I expect haggling with Virgin can result in better terms being offered. Probably one better discussed on the relevant forum though.

devoncop22

I have been with Zen Internet now for many years. Excellent company to deal with (fast UK customer service and technical support line) and I have a guaranteed "No price increase for as long as you stay with us" clause😁.

When I signed up they were not the cheapest but my loyalty is paying off in spades now. Not sure if they still offer this deal but may be worth checking out for BB.

Money_Grabber13579

user1977 said:

If you can break the contract without penalty, that's all that is required - the fact it might be inconvenient to arrange an alternative supplier doesn't come into it.

And if you are entitled so to break the contract - I expect haggling with Virgin can result in better terms being offered. Probably one better discussed on the relevant forum though.

The problem is that with many other providers, you can’t leave penalty free and if I understand the OP correctly, new virgin contracts also can’t be exited penalty free when they stick their prices up. In my view, the rules should be simple - if they want to put their prices up in the middle of a contract, the consumer should be allowed to leave.

Yes, that might have the effect of pushing up prices at the start of the contract, but I’d much prefer to know that I’ll be paying £40 a month for 2 years, rather than £35 at the start, then £40 a month for 12 months and then £50 a month for the remaining term.

user1977

Money_Grabber13579 said:

user1977 said:

If you can break the contract without penalty, that's all that is required - the fact it might be inconvenient to arrange an alternative supplier doesn't come into it.

And if you are entitled so to break the contract - I expect haggling with Virgin can result in better terms being offered. Probably one better discussed on the relevant forum though.

The problem is that with many other providers, you can’t leave penalty free and if I understand the OP correctly, new virgin contracts also can’t be exited penalty free when they stick their prices up. In my view, the rules should be simple - if they want to put their prices up in the middle of a contract, the consumer should be allowed to leave.

I think the point is that you can leave now penalty-free, in order to avoid accepting the new terms.

Money_Grabber13579

user1977 said:

Money_Grabber13579 said:

user1977 said:

If you can break the contract without penalty, that's all that is required - the fact it might be inconvenient to arrange an alternative supplier doesn't come into it.

And if you are entitled so to break the contract - I expect haggling with Virgin can result in better terms being offered. Probably one better discussed on the relevant forum though.

The problem is that with many other providers, you can’t leave penalty free and if I understand the OP correctly, new virgin contracts also can’t be exited penalty free when they stick their prices up. In my view, the rules should be simple - if they want to put their prices up in the middle of a contract, the consumer should be allowed to leave.

I think the point is that you can leave now penalty-free, in order to avoid accepting the new terms.

But that doesn’t get around the fact that in future, anyone with virgin and most other mainstream providers won’t be able to leave penalty free when they jack up their prices mid contract.

IamNotAllowedToUseMyName

VM: "As the annual price increase is provided for in your terms, there is no right to cancel given for the price increase from April 2024."

That contradicts the guidance on Fair Contracts which explicitly states that:

a) price increases must be seen to be related to costs

b) an automatic price increase can only be considered fair if there is aright to cancel the contract.

As neither of these are true, I am not bound by the terms of the pricing contract and can choose to ignore them. Might have a fight on my hands, but basically, no VM customer need pay any price increase as the whole pricing term fails.

The principle of an unfair contract is "balanced rights". Here the comms companies are attempting to give themselves the right to escalate prices with no relation to their costs and without being able to break the contract, where the consumer can't change the contract to suit their changing circumstances. Hence the importance of the price change contract break - it allows a cash strapped consumer to turn round and say, you know what, your prices have gone up, but my income hasn't. Why should I cover your costs when I've been given no more money to do so?" (That sort of argument is used throughout guidance, BTW).