Which calls on Ofcom to investigate VMO2 for price hiking

Consumer watchdog Which has asked UK telecoms regulator Ofcom to urgently investigate VMO2 ’over fears they could break the law’ with regard to broadband contracts – a claim the telco fiercely refutes.

Which claims VMO2 ‘is potentially breaking the law by giving itself sweeping powers to hike customers’ broadband bills by unlimited sums whenever it chooses.’

The accusation is that alongside applying ‘aggressive’ inflation-linked annual mid-contract price rises, VMO2 is also maintaining the right to increase charges further at any time – which is described in the announcement as ‘an attempt by the firm to both have its cake and eat it’ as well as ‘the most egregious example of unacceptable price hiking practice across the broadband industry.’

Which states that the discretionary price rise clause has been part of VMO2 contracts for a while, but new terms also allow for annual price rises based on the retail price index (RPI) rate of inflation plus an additional 3.9%, and removes the right for affected customers to cancel without paying ‘substantial’ exit fees.

We’re told VMO2 is the only major broadband provider to use the retail price index (RPI) as the basis for its increases as opposed to the consumer price index (CPI) – and the problem Which has with this is that RPI is typically higher than CPI. To back this up, it cites the Office for National Statistics which apparently discourages the use of RPI, ‘saying it’s not a good measure of inflation and is likely to overstate it.’

All in all, the problem with this example in particular and inflation-based mid-contract price rises in general are articulated as creating a situation in which it is impossible tell how much a customer will end up paying for a 24 month long broadband contract. Which thinks the clauses amount to unfair contract terms and could be in breach of the Consumer Rights Act.

It also drops in some recent research it has done which concluded only one in 20 consumers were capable of estimating what impact an inflation-linked mid-contract price rise would have on their monthly telecoms bill. As such Which has urged Ofcom to proceed urgently with an investigation into VMO2, and suggests the regulator could demand the telco drops its ‘unfair terms’ and ultimately ask a court to declare them unlawful.

“Virgin Media is trying to have its cake and eat it by imposing eye-watering inflationary price increases while also giving itself the power to hike customers’ bills whenever it chooses,” said Rocio Concha, Which Director of Policy and Advocacy. “Which believes this is not only unacceptable but potentially unlawful and Ofcom must investigate urgently.

“This should send a clear message to all telecoms firms that time is up for these unjustifiable inflation-linked, mid-contract price hikes. Providers should make a commitment now that they will not try to impose these increases next year, to reassure customers already struggling in a cost of living crisis that they will not face yet another unpredictable hit to their finances.”

Unsurprisingly, VMO2 took issue with these claims. A spokesperson told us: “We refute these baseless allegations in the strongest possible terms, which amount to a one-sided, selective and misinformed reading of widely used contractual terms.

“We have always been open and transparent about any price increases. While we know that price changes are never welcome, against a backdrop of rising costs, increased usage and continued investment, we have already openly set out to customers that we are introducing inflation-linked price changes from April next year, which are widely used and give customers greater certainty about what to expect from their bills. Customers were given the right to cancel their contract within 30 days of receiving this notification.

“It’s very worrying that Which is choosing to wilfully misrepresent our pricing practices. Our terms and conditions are very clear that inflation-linked price rises only apply to a customer’s monthly subscription charges and we have no plans to increase monthly bills multiple times within the same year. If separate out-of-bundle charges are increased at any point, then this would be clearly outlined and customers would receive a right to cancel.

“Our terms and conditions have been drafted in line with standard industry practice, consumer law and Ofcom guidelines, and we are extremely disappointed that Which has decided to make misrepresented claims relating to a single provider, especially one that has made more effort than many to be transparent with its customers.”

An Ofcom spokesperson told us: “We will consider – and respond to – the issues that Which has raised. We already have an enforcement programme open into whether telecoms firms have previously been complying with our rules, which state that mid-contract price rises must be set out clearly before customers sign up. We are also reviewing whether inflation-linked, mid-contract price rises give customers sufficient certainty and clarity about what they can expect to pay. We will report on both of these later this year.”

Even the Which announcement stipulates that VMO2 ‘is not the only provider that may be relying on questionable terms and conditions to justify inflationary price hikes’ and is also urging Ofcom to have a look at all the other providers in this regard as well – but it’s certainly got its sights squarely aimed at VMO2 in this release.

The Which report is quite pointed in its language and comes off as particularly sharp since it’s one firm in particular being lambasted – but the spirit of it is something that already has the regulator’s attention industry wide.

In February it announced it was reviewing whether inflation-linked, mid-contract price rises are fair for consumers, claiming many UK fixed broadband and mobile customers don’t fully understand how any price rises during their contract would be calculated, nor what the various inflation measures actually mean.

Meanwhile in adjacent hot water for VMO2, Ofcom announced last month it was investigating the telco as it was concerned about the number of complaints it has received from customers saying they had tried to switch provider, but that it was difficult for them to leave. Problems ranged from inability to get through on the phone to speak to an agent, to dropped customer care calls, lengthy periods on hold, and the telco’s failure to action customer instructions.

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