Investigation into Virgin Media’s early termination charges
|Investigation into||Virgin Media Limited (‘Virgin’)|
|Case opened||28 June 2017|
|Case closed||16 November 2018|
This investigation found that Virgin contravened General Conditions (‘GCs’) 9.2 and 9.3 by:
We imposed a penalty of £7m on Virgin for these contraventions.
Virgin also agreed to make a number of improvements to the information it provides to its customers about its ETC policy when they move home.
During the course of the investigation, Virgin contravened information requirements imposed under s135 of the Communications Act 2003 (the ‘Act’). We imposed a penalty of £25,000 on Virgin for this contravention.
Since the closure of this case, HMRC has issued new guidance about the treatment of VAT in the calculation of early termination fees and compensation payments. Further information can be found here.
|Relevant legal provision(s)||
GC 9.2 and GC 9.3 (now contained in GCs C1.2 and C1.3), and s135 of the Act
Ofcom has published non-confidential versions of the two Confirmation Decisions issued to VM on 16 November 2018:
Ofcom has today issued a Confirmation Decision to Virgin under s96C of the Communication Act 2003 for contraventions of GCs 9.2(j) and 9.3 of the General Conditions between at least 1 September 2016 and 22 August 2017. Specifically, Ofcom has found that Virgin:
(i) contravened GC 9.2(j) during the period 1 September 2016 to 20 March 2017 by not publishing clear and up-to-date information on its website to allow customers to easily identify the ETC which applied to their Virgin package; and
(ii) contravened GC 9.3 during the period 22 September 2016 to 22 August 2017 by setting and charging ETCs that were higher than the amounts that its customers on fixed term contracts had agreed to pay so that it failed to ensure that its conditions and procedures for contract termination did not act as disincentives for its customers against changing provider. Virgin overcharged almost 82,000 customers a total of just under £2.8m.
In light of these findings, Ofcom has imposed a penalty of £7m on Virgin. The penalty has been set at a level sufficient to reflect the seriousness of the contravention and to act as a deterrent to Virgin and other providers from contravening the rules. It also takes account of the actions Virgin has taken since we opened the investigation, including refunding affected customers and reducing the level of the ETCs it charges to customers.
A non-confidential version of the Confirmation Decision is currently being prepared and will be published shortly.
Ofcom has also been investigating under the Consumer Rights Act 2015 the fairness and transparency of Virgin’s procedures and contract terms that apply to customers moving home. Virgin has made a number of changes to its procedures, including:
- making clearer to consumers that Virgin’s network does not cover the whole of the UK and that if a customer moves to a home outside of Virgin’s network they may be liable to pay an ETC. In particular Virgin will make this clear in:
- its customer contracts and terms and conditions;
- the material on its website; and
- in the scripts used by its customer service agents.
- pointing customers towards its postcode coverage checker and to the availability of its 30 day rolling contracts as an alternative option for customers who are aware they may need to move house in the near future; and
- updating its agent training materials and process to ensure that agents provide correct information to customers that indicate they may need to move home.
In addition, Virgin has amended its terms and conditions so that customers moving home within Virgin’s network who continue to take Virgin’s services no longer have to sign up to a new fixed term contract in order to avoid paying ETCs (they can instead continue with their existing contract at their new address).
As a result of these changes Ofcom is now closing its investigation. We will be continuing to monitor complaints against Virgin about these issues closely, to ensure that customers are made aware of their potential ETC liability under Virgin’s terms and conditions when moving home.
We are also continuing to monitor complaints about these issues across CPs, and compliance with the rules about ETCs, as part of our ongoing enforcement programme.
During the course of this investigation, Ofcom became aware that Virgin had failed to provide complete information in response to a statutory information request issued by Ofcom under section 135 of the Act. We have therefore today issued a Confirmation Decision under s139A of the Act to Virgin for its contravention of requirements to provide information. We have imposed a penalty of £25,000 on Virgin for this contravention.
Following an investigation, Ofcom has determined that there are reasonable grounds for believing that Virgin Media Ltd (Virgin) contravened GC 9.3 and GC 9.2(j) of the General Conditions over periods occurring between 1 September 2016 and 11 September 2017. Ofcom has therefore issued a Notification to Virgin under section 96A of the Communications Act 2003.
Specifically, Ofcom has reasonable grounds to believe that Virgin contravened GC 9.3 by: (i) setting and charging customers early termination charges (ETCs) which were too high; (ii) requiring customers moving house to an area within Virgin’s network to sign up to a new fixed term contract or pay ETCs; and (iii) failing to take action to ensure that its conditions and procedures for contract termination did not act as disincentives to its customers against changing provider.
Having reviewed the evidence gathered in the investigation, we also have reasonable grounds for believing Virgin also contravened GC 9.2(j) when it failed to publish on its website clear and up-to-date information about the ETCs payable when fixed term contracts are terminated.
Virgin now has an opportunity to make representations to Ofcom on the matters contained in the Notification before Ofcom makes a final decision in accordance with section 96C of the Act. We aim to reach our final decision in this case by the end of summer 2018 and will publish our findings accordingly.
The fairness of terms within Virgin’s consumer contracts which require customers who move home outside of Virgin’s network (and are therefore unable to continue to take Virgin services) to pay ETCs does not fall within the scope of GC 9.3. We are continuing to consider whether these terms raise concerns under the Consumer Rights Act, and if so what action might be appropriate, and we will provide an update in due course.
Following complaints received from consumers, Ofcom has today opened an investigation into Virgin’s compliance with GC9.3 and the application of section 62 of the CRA to its consumer contracts.
GC9.3 requires CPs to ensure that their conditions or procedures for contract termination for electronic communications services do not act as a disincentive for end-users against changing provider.
Section 62(1) of the CRA provides that an unfair term of a consumer contract is not binding on the consumer. Ofcom has powers under the CRA and Part 8 of the Enterprise Act 2002 to take enforcement action in respect of unfair terms under section 62 of the CRA.
The investigation will examine whether the terms and conditions of Virgin’s consumer contracts for broadband, phone and television services, which require the payment of early termination charges (“ETCs”) when a consumer terminates a fixed term contract (including circumstances where a customer is terminating because of a change of address), comply with GC9.3 and/or are unfair for the purposes of section 62.
Geoff Brown (email: firstname.lastname@example.org)