A consumer champion is bringing a “loyalty penalty” class action against the UK's four largest mobile phone network operators.
Justin Gutmann and the law firm Charles Lyndon have launched the claim against Vodafone, EE, Three, and O2, and their respective parent companies.
The £3bn plus claim alleges that the companies used their market dominance to overcharge on up to 28.2 million UK mobile phone contracts.
The class action is the first to target the mobile providers’ practice of charging existing customers more than new customers for the same services – the so-called “loyalty penalty”.
The Loyalty Penalty Claim alleges the companies have been abusing their dominant positions in the UK mobile industry by overcharging customers for handsets beyond the end of their contractual term.
Gutmann alleges the mobile operators have overcharged on up to 28.2 million contracts and, as a result, is seeking damages of at least £3.285bn. If successful, someone who held a contract with just one of the mobile operators could receive as much as £1,823.
Many consumers are expected to have claims against more than one mobile operator and so could receive even more compensation. The class actions have been filed in the Competition Appeal Tribunal in London.
Handsets and airtime contracts
The claim is being brought on behalf of consumers who have purchased mobile contracts made up of a mobile phone and airtime services such as data, minutes and calls. When these contracts are agreed, their price during the minimum term of the contract includes both the mobile and the use of airtime services.
The Loyalty Penalty Claim alleges that the mobile network operators failed to reduce the amount charged once the minimum contractual term expired, despite the fact that consumers had already paid for their handsets. This resulted in existing customers being charged more than a new customer would be if they were just paying for airtime services.
A typical example would be someone who agreed a two-year contract combined contract for a mobile phone and a SIM airtime services deal, paid off their mobile phone during the course of their contract, but then continued to be charged the same amount once the minimum contract term had expired. This would have resulted in them paying far more than they would if they were a new customer on a SIM-only deal.
Class action
Most customers of these mobile network operators who made payments after the expiry of their contractual minimum term are included in the Loyalty Penalty Claim, which is being conducted on an “opt-out” basis. This means that the claim is brought on behalf of a defined group of people, but those people do not have to be personally identified.
All qualifying consumers will be automatically included in the claim for free unless they follow specific steps to opt out.
The Loyalty Penalty Claim follows a super-complaint from Citizens Advice to the Competition and Markets Authority (CMA) in September 2018. The CMA found that: “We do not consider that providers should continue to charge customers the same rate once they have effectively paid off their handsets at the end of the minimum contract period. This is unfair and must be stopped.” The charity also added that customers “rightly feel ripped off, let down and frustrated”.
Justin Gutmann said: “I’m launching this class action because I believe these four mobile phone companies have systematically exploited millions of loyal customers across the UK through loyalty penalties – taking over £3bn out of the pockets of hard working people and their families. These companies kept taking advantage of customers despite the financial crisis of 2008, Covid and now the cost-of-living crisis. It’s time they were held to account.”
“If our claim is successful, it will finally stop these firms from taking advantage of their loyal customers and stop the immoral practice of loyalty penalties.”
To learn more or to opt-out of the Loyalty Penalty Claim class action, visit www.LoyaltyPenaltyClaim.com
