Enforcement programme into early termination charges

26 September 2019

Closed

Programme into Communications Providers (‘CPs’) offering fixed line telephony, broadband, mobile, and/or pay TV services to consumers
Case opened 28 June 2017
Case closed 20 September 2019
Summary

This enforcement programme is looking at the charges imposed by CPs when consumers on fixed term contracts terminate those contracts early (early termination charges or ‘ETCs’). Under the programme, Ofcom is collecting information and reviewing consumer complaints to assess whether there are any issues with the transparency and fairness of ETCs, and whether any further action, including enforcement action, is required.

Relevant legal provision(s)

General Condition C1.2, C1.3 (previously 9.2 and 9.3) and the Consumer Rights Act 2015 (‘the CRA’)

Ofcom is today announcing the closure of its enforcement programme into early termination charges (‘ETCs’).

Communications Providers (‘CPs’) should ensure their ETCs are fair and transparent to consumers on fixed term contracts. Where this is not the case, this is likely to hinder the ability and willingness of consumers to switch provider when that may be in their interests. This in turn may undermine competition and result in harm to consumers.

Through our ETC programme, we have successfully tackled a wide range of issues relating to CP’s ETCs and/or the transparency of ETC information made available by CPs to consumers, to ensure the following:

  • that CPs are taking appropriate steps to make consumers aware of any applicable ETCs when they are signing up to a minimum contract period; and
  • that terms and conditions imposing ETCs on consumers comply with C1.3 and are fair for the purposes of the CRA.

We have:

  • concluded two investigations into EE and Virgin Media in relation to ETCs where we found both companies in breach of C1.2 and C1.3. Our investigations found that c. 400k EE customers overpaid ETCs by up to £4.3m and c. 82k Virgin Media customers overpaid ETCs to the value of just under £2.8m. Both companies also failed to make sufficiently clear the charges customers would have to pay if they ended their contract early. As a result, we fined them a combined total of £13.3m (EE £6.3m and Virgin Media £7m) and they were required to refund affected customers;
  • concluded initial assessments into four CPs about the inputs they use when calculating ETCs and their terms, conditions and procedures relating to ETCs. These initial assessments secured a number of positive results, including a reduction in the level of ETCs charged and refunds to customers that had been overcharged ETCs;
  • following our EE and Virgin ETC investigations, we also wrote to seven of the larger CPs reminding them of their regulatory obligations in relation to the calculation and transparency of their ETCs. As a result of these letters, a number of CPs made positive changes to the ETC information on their websites and/or changed the way in which their ETCs were calculated; and
  • engaged more generally with CPs on a number of broader contracts issues.

In light of these successes to date and generally high levels of compliance, we have decided that it is no longer necessary to undertake this enhanced level of monitoring. As a result, we are closing this enforcement programme.

Nevertheless, ensuring ETCs are fair and transparent to consumers are among the most important regulatory obligations on telecoms companies. We therefore remain committed to ensuring there are no issues of concern with the transparency and fairness of ETCs and that companies continue to comply with their obligations in this area.

We will continue to monitor compliance and maintain an oversight of these important requirements albeit we envisage many of the aims and objectives of the ETC enforcement programme will be taken forward under the Customer Fairness programme. We will not hesitate to consider formal enforcement action where we identify any suspected non-compliance.


Case leader

Rachel Bennett (email: rachel.bennett@ofcom.org.uk)

Case reference CW/01199/06/17