Are escalating Broadband Bills a Fair Contract?

user1977

IanMSpencer said:

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.

No, I think you've misread the guidance - linking the price increase to RPI falls within the first two bullet points of 5.23.5. The third one is what applies to other types of variation - they don't need to let you cancel just because you don't like the rate of inflation. So the contract is fair, if you've signed up to it - and you'll be deemed to have done so if you don't take the opportunity now to cancel your current contract.

IamNotAllowedToUseMyName

user1977 said:

No, I think you've misread the guidance - linking the price increase to RPI falls within the first two bullet points of 5.23.5. The third one is what applies to other types of variation - they don't need to let you cancel just because you don't like the rate of inflation. So the contract is fair, if you've signed up to it - and you'll be deemed to have done so if you don't take the opportunity now to cancel your current contract.

I might agree if the increase was just RPI, but they've also granted themselves an extra 3.9% on top. They explicitly state if RPI is 0% or less, they are still having an 3.9% increase.

user1977

IanMSpencer said:

user1977 said:

No, I think you've misread the guidance - linking the price increase to RPI falls within the first two bullet points of 5.23.5. The third one is what applies to other types of variation - they don't need to let you cancel just because you don't like the rate of inflation. So the contract is fair, if you've signed up to it - and you'll be deemed to have done so if you don't take the opportunity now to cancel your current contract.

I might agree if the increase was just RPI, but they've also granted themselves an extra 3.9% on top. They explicitly state if RPI is 0% or less, they are still having an 3.9% increase.

But like the guidance says, that's an essential part of the price - it's clear, and you know about it from day one. If you don't like the idea of it escalating like that (or the price in general!), you don't enter into the contract.

IamNotAllowedToUseMyName

user1977 said:

IanMSpencer said:

user1977 said:

No, I think you've misread the guidance - linking the price increase to RPI falls within the first two bullet points of 5.23.5. The third one is what applies to other types of variation - they don't need to let you cancel just because you don't like the rate of inflation. So the contract is fair, if you've signed up to it - and you'll be deemed to have done so if you don't take the opportunity now to cancel your current contract.

I might agree if the increase was just RPI, but they've also granted themselves an extra 3.9% on top. They explicitly state if RPI is 0% or less, they are still having an 3.9% increase.

But like the guidance says, that's an essential part of the price - it's clear, and you know about it from day one. If you don't like the idea of it escalating like that (or the price in general!), you don't enter into the contract.

I think the point of this guidance though is trying to explain that ultimately a contract has to be reasonable. Is it reasonable to expect a consumer to sign up to an escalating clause where the RPI in future is unknown and there is a blanket increase? Note the guidance is not couched in terms that an RPI increase is acceptable, full stop, it just suggests it is likely to be, if appropriately approached. So, I don't know what RPI is in a year's time. If it was 25% I might decide I want to cancel a 30% increase and take on a cheaper service. As a consumer, I am not assumed to be able to foresee my circumstances in the same way as a company can apply resources to researching.

To be honest, I think this sort of contract is going to become so widespread (Vodafone have similar provisions IIRC) I think it needs Martin Lewis to take up cudgels as it becomes a complex monopoly for price increases.

MattMattMattUK

Money_Grabber13579 said:

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.

They are not "jacking up" the contract mid-term though, it is a contractual rise which you are well aware of at the point you agree the contract, not an arbitrary increase that they make up when they feel like it. 

MattMattMattUK

IanMSpencer said:

user1977 said:

IanMSpencer said:

user1977 said:

No, I think you've misread the guidance - linking the price increase to RPI falls within the first two bullet points of 5.23.5. The third one is what applies to other types of variation - they don't need to let you cancel just because you don't like the rate of inflation. So the contract is fair, if you've signed up to it - and you'll be deemed to have done so if you don't take the opportunity now to cancel your current contract.

I might agree if the increase was just RPI, but they've also granted themselves an extra 3.9% on top. They explicitly state if RPI is 0% or less, they are still having an 3.9% increase.

But like the guidance says, that's an essential part of the price - it's clear, and you know about it from day one. If you don't like the idea of it escalating like that (or the price in general!), you don't enter into the contract.

I think the point of this guidance though is trying to explain that ultimately a contract has to be reasonable. Is it reasonable to expect a consumer to sign up to an escalating clause where the RPI in future is unknown and there is a blanket increase? Note the guidance is not couched in terms that an RPI increase is acceptable, full stop, it just suggests it is likely to be, if appropriately approached. So, I don't know what RPI is in a year's time. If it was 25% I might decide I want to cancel a 30% increase and take on a cheaper service. As a consumer, I am not assumed to be able to foresee my circumstances in the same way as a company can apply resources to researching.

Yes, because the total term of the contract is fixed to two years and the RPI+3.9% is made clear up front.

IanMSpencer said:

To be honest, I think this sort of contract is going to become so widespread (Vodafone have similar provisions IIRC) I think it needs Martin Lewis to take up cudgels as it becomes a complex monopoly for price increases.

It is not a monopoly of any kind. 

Money_Grabber13579

MattMattMattUK said:

Money_Grabber13579 said:

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.

They are not "jacking up" the contract mid-term though, it is a contractual rise which you are well aware of at the point you agree the contract, not an arbitrary increase that they make up when they feel like it. 

The consumer is aware of the concept of the rise but not if the amount. When anyone entered into contracts over a year ago, who would have thought that they would now be increasing by 15%?

Being in business means that you have to take risk if you want to generate a profit and businesses have the option of availing if hedging products if they want to protect themselves against that risk. In this case, it is consumers who are being used as the protection for businesses, which can’t be fair.

IamNotAllowedToUseMyName

Well, well, not a complex monopoly?  Why are we seeing BT using CPI plus 3.9%?

Also, check out how Virgin advertise their contracts. They have a large headline price, then a tiny little mark and halfway down the page there is a comment "Prices of Virgin Media services may rise during contract." which is a lie - they will rise regardless.

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).

MattMattMattUK

Money_Grabber13579 said:

MattMattMattUK said:

Money_Grabber13579 said:

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.

They are not "jacking up" the contract mid-term though, it is a contractual rise which you are well aware of at the point you agree the contract, not an arbitrary increase that they make up when they feel like it. 

The consumer is aware of the concept of the rise but not if the amount. When anyone entered into contracts over a year ago, who would have thought that they would now be increasing by 15%?

Neither were businesses aware of the amount of the rise in their costs. People may not have thought that they would be increasing by 15%, but they would have been naive at best to think there would have been no rise, or even a <10% rise. 

Money_Grabber13579 said:

Being in business means that you have to take risk if you want to generate a profit and businesses have the option of availing if hedging products if they want to protect themselves against that risk.

Being in business is a risk, as is everything in life. Businesses cannot hedge everything, many businesses can barely hedge anything. Having contracts that protects them against some element of risk, RPI+ contracts are part of that and a business would be stupid not to put those on a two year contract. 

Money_Grabber13579 said:
In this case, it is consumers who are being used as the protection for businesses, which can’t be fair.

They are not being used as "protection", they are part of the whole business plan, as are new deals being offered, shedding higher risk customers, customer defaults increasing etc. There is nothing inherently unfair about an RPI+ mid-term increase on a two year contract. 

IamNotAllowedToUseMyName

Money_Grabber13579 said: ago, who would have thought that they would now be increasing by 15%?

Being in business means that you have to take risk if you want to generate a profit and businesses have the option of availing if hedging products if they want to protect themselves against that risk. In this case, it is consumers who are being used as the protection for businesses, which can’t be fair.

Saw a case where someone started a contract 3 months ago, and of course they also get the £7(?)/month price hike having signed up to a £39/month contract in December. Clearly, they hadn't grasped the implications of the contract not being a yearly review but an April review, but then I can point to the website (as mentioned above) that does not clearly bring this important term to the consumer in similar emphasis to the price offer, which is an advertising breach. I imagine that if you signed up during March, you'd be really miffed.