Consumer complaint against O2 about unfair contract terms

05 August 2004

Complainant: A member of the public
Complaint against: O2 (UK) Ltd
Case opened: 28 July 2004
Case closed: 10 November 2004
Issue: Unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999 ("the Regulations").

Ofcom received a complaint in relation to a number of terms in O2's pre-pay terms and conditions.

Ofcom has considered O2's terms and conditions for its Pay as You Go mobile service.

Clause 4.1(a) of O2's terms and conditions states that O2 may have to "alter the number of your Mobile Phone, or any other name, code or number associated with the Service for reasons beyond our control or where we reasonably believe that the alteration will enhance your use of the Service".

Ofcom regards this clause as potentially unfair under paragraph 1(k) of Schedule 2 to the Regulations, as it allows for a unilateral amendment to the characteristics of the service without a valid reason.

O2 has agreed to change the term to:

"alter the number of your Mobile Phone, or any other name, code or number associated with the Service for reasons beyond our control, such as where requested to do so by a governmental authority or regulatory body or where we reasonably believe that the alteration will enhance your use of the Service. If this is the case we will give you reasonable notice".

Clause 5.3 of O2's terms and conditions states that O2 shall have no obligation to make refund of any unused credits in the event that a Mobile Phone is lost, stolen, damaged or destroyed or used without authority.

Ofcom regards this clause as potentially unfair under paragraph 1(e) of Schedule 2 of the Regulations, as it allows O2 to require any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.

O2 has agreed to give more prominence to this term and to highlight the insurance provisions under which a customer could obtain a refund of any existing call credits subject to the terms of their policy.

Clause 6 of O2's terms and conditions allows O2 to assign its rights and obligations under the contract to any third party at any time and without the customer's consent.

Ofcom regards this clause as potentially unfair under paragraph 1(p) of Schedule 2 to the Regulations, as it provides no guarantee to the customer of continued service quality.

O2 has agreed to change the term to:

"We shall be entitled to assign or transfer our rights under this Agreement or any part of it on the same terms to any third party."

Clause 7.1 of O2's terms and conditions allows O2 to disconnect the mobile phone where it is unused for six months. It also states that any credits left on the customer's account will be forfeited.

Ofcom may regard the ability of O2 to retain any credits left on the account as potentially unfair under paragraph 1(f) of Schedule 2 to the Regulations, in that it could result in a customer forfeiting a disproportionate amount of money.

O2 has agreed to put this term in bold.

However, in the absence of a specific complaint or evidence of consumer detriment, Ofcom's position has been reserved in respect of the wording of this clause. Ofcom will revisit this term in the event that any evidence arises of potential or actual unfairness to the detriment of consumers and, if necessary, take formal enforcement action under the Unfair Terms in Consumer Contract Regulations 1999.

Clause 7.4 of O2's terms and conditions allows O2 to reconnect a disconnected phone in its absolute discretion. It also allows O2 to levy a reconnection fee for any reconnection.

Ofcom regards the ability of O2 to levy a reconnection fee for any reconnection, including where the disconnection was due to the negligence of O2, to be potentially unfair under paragraph 1(o) of Schedule 2 to the Regulations.

O2 has agreed to change the term to:

"If your Mobile Phone is disconnected and you wish your Mobile Phone to be reconnected to the Network, you must call our Member Service number. If we agree to reconnect you, you must pay a reconnection fee unless the disconnection was due to our negligence. Details of the current charge are available on request".

Clause 11.1 of O2's terms and conditions allows O2 to modify the terms and conditions at any time, such amendments taking effect immediately on notification to the customer. The means of notification is reserved to O2's discretion.

Ofcom regards the ability of O2 to determine the means of notification as potentially unfair under paragraph 1(i) of Schedule 2 to the Regulations where O2 chooses a means of notification which does not give customers a reasonable opportunity of becoming acquainted with any amendments.

O2 has agreed to amend the term and to add a new Clause 11.2 as follows:

"11.1 Subject to clause 11.4 below we may increase or decrease our Charges at any time (including the introduction of charges for aspects of the Service previously provided free). Where we increase the Charges we will notify you by text message before the changes become effective.

11.2 We reserve the right to change our terms and conditions of Service from time to time. We will notify you of any changes to these terms by posting them on our website at www.o2.co.uk/terms. In addition to this we may also notify you by messages on our IVR top-up system, messages via the Service (such as voicemail, text or media message) or by means of national advertising campaigns."

On the basis of the above, Ofcom has decided to close the investigation.
It should be noted that Ofcom does not have the power to "clear" terms under the Regulations. Only a court has the power to determine whether a term is unfair under the Regulations. Ofcom is therefore able to consider any further complaints regarding these Terms and Conditions in the light of the evidence presented to it.

Case leader: Andrew Walker (email: Andrew.Walker@ofcom.org.uk)
Case reference: CW/00778/07/04

Text published when the case was opened

Complainant: A member of the public
Complaint against: O2 (UK) Ltd
Case opened: 28 July 2004
Issue: Unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999.

Ofcom has received a complaint about terms in O2's contract "Pre Pay terms and Conditions", and is investigating whether any terms may be unfair.

Case Leader: Andrew Walker (Andrew.Walker@ofcom.org.uk)
Case Reference: CW/00778/07/04