Enforcement programme into in-contract price variation terms

We are today closing our enforcement programme into the prominence and transparency of in-contract price variation terms included in residential phone (fixed-line and mobile) and broadband consumer contracts, entered between 1 March 2021 and 16 June 2022.

We have obtained information from a range of communications providers to examine whether they complied with the relevant General Conditions in force at the time. This includes information about:

• whether providers made their price variation terms sufficiently prominent and transparent to customers at the time that they agreed to the price; and,
• if not, whether providers gave customers at least one month’s notice and the right to exit their contract without charge, before applying a price increase.

Findings

In almost all instances, providers stated the price variation term at some point during online, phone and face-to-face sales conducted during the relevant period. The amount of information given about the term and the way it was presented varied from provider to provider, but generally providers set out how the price increase would be calculated and when it would apply, before customers agreed to the price.

Stating the price variation term during a sales journey does not, by itself, mean that a term has been made sufficiently prominent and transparent. Throughout the course of this programme, we identified several ways that providers could have communicated their price variation term more clearly to their customers. While we did not consider that these issues required further investigation, we have shared our findings with the relevant providers and have strongly encouraged them to review their current terms and conditions and sales journeys to consider whether any improvements can be made.

In a small number of instances, providers may not have given customers sufficient information about the price variation term during certain sales journeys and did not give those customers at least one month’s notice and the right to exit their contract without charge before applying the price increase, giving rise to potential compliance concerns under the relevant General Conditions. As a result of informal engagement around these concerns, we have secured some remedial action, including refunds for some affected customers. We will continue to engage with providers about any remaining concerns, escalating to separate, targeted enforcement action if necessary.

Looking forward

We are now closing this enforcement programme, which has been looking at providers’ compliance with the rules that were in force between 1 March 2021 and 16 June 2022. The rules changed on 17 June 2022 and communication providers are now required to give relevant customers contract information and contract summary documents, containing key information about the products or services on offer, before the customer enters into a contract.

Ofcom is now consulting on new rules and guidance prohibiting inflation-linked in-contract price rises. Our proposals include new requirements for providers to draw customers’ attention, at the point of sale, to any price rises that are written into contracts. We encourage any interested parties to engage with this consultation.

Today, Ofcom is opening an enforcement programme into the prominence and transparency of in-contract price variation terms included in residential phone (fixed-line and mobile) and broadband consumer contracts entered into between 1 March 2021 and 16 June 2022.

Our objectives for this programme are:

• To understand whether and how providers made consumers aware of price variation terms and their effect at the time they entered into the contract, between 1 March 2021 and 16 June 2022.
• To examine whether this raises issues under the relevant General Conditions to determine whether any further action, including enforcement, is required.

In-contract price variation terms

In-contract price variation terms are written into some communication providers’ contracts. They allow the provider to increase the core subscription price paid by a customer at different times throughout their contract. These terms can take different forms, some providers link their terms to a rate of inflation (e.g., increasing prices by the Consumer Price Index (CPI) or Retail Price Index (RPI)), some to a percentage of the existing price, and some to a combination of the two (e.g., CPI + X%). Not all providers have price variation terms, but those that do often apply them in March or April each year.

Regulatory requirements

Our programme will take into account the regulatory requirements that were in force between 1 March 2021 and 16 June 2022. During this time, General Conditions C1.14 to C1.17 (formerly C1.6 to C1.9) required providers to give customers at least one month’s notice of contractual modifications likely to be of material detriment and a right to exit the contract without penalty (C1.14). One type of contractual modification which was likely to be of material detriment to a customer was increasing their core subscription price during their fixed contract period. However, the previous requirements did not apply to price variation terms, provided that at the time the customer entered into the contract those terms were sufficiently prominent and transparent, such that the customer could be said to have agreed to those terms. If this was not the case, the requirements in General Condition C1.14 apply.

Our rules and guidance were updated on 17 June 2022.

Ofcom’s enforcement programme

Following consumer complaints, concerns raised by a number of stakeholders, and a period of informal information gathering, we are concerned that some price variation terms in consumer contracts entered into between 1 March 2021 and 16 June 2022 may not have been made sufficiently prominent and transparent.

We are opening this enforcement programme to investigate the matter further. We will gather information and engage with a range of providers as part of this. Where we identify specific issues with compliance, we may initiate separate investigations into named providers.

We encourage all providers to review the steps they took to ensure their price variation terms were prominent and transparent to customers. If these terms were not prominent and transparent, providers should give customers at least one month’s notice and the right to leave their contract penalty free should they apply these price terms.

We will update this page as the enforcement programme progresses.