Virgin Media accused of breaking the law over price hikes
Which? is demanding Ofcom investigates “unlawful” Virgin Media contracts that allow the firm powers to hike customer broadband bills by unlimited sums whenever it chooses.
The consumer champion believes Virgin Media’s terms for customers are an attempt to “have its cake and eat it” by applying aggressive inflation-linked annual mid-contract price increases in its terms and conditions while removing the right for affected customers to cancel without paying substantial exit fees.
Which? has formally raised Virgin Media’s behaviour with Ofcom, describing it as “the most egregious example of unacceptable price hiking practices across the broadband industry”.
Virgin Media has almost six million broadband customers in the UK. This year its existing customers faced eye-watering 13.8% average increases to their bills, equivalent to more than £100 a year for some households.
Which?’s complaints to Ofcom highlight a long-standing clause in Virgin Media’s terms and conditions, which states the firm can “change our charges at any time” – effectively a licence to impose unlimited increases.
Virgin Media has maintained this line in its terms and conditions, while also adding a new clause stating that, in future, customers will face annual price rises based on Retail Price Index (RPI) inflation plus an additional 3.9%. This is the same rate imposed on Virgin Mobile and O2 Mobile customers, who this year faced 17.3% hikes.
Virgin Media is the only broadband provider to use RPI – which is typically higher than CPI – as the basis for annual price increases. The Office for National Statistics (ONS) dropped RPI as a national statistic in 2013, stating “we do not think it is a good measure of inflation and discourage its use”.
‘A significant imbalance’
Which? believes both clauses used by Virgin Media amount to unfair contract terms and could be in breach of the Consumer Rights Act by creating “a significant imbalance” between the rights Virgin Media has granted itself and those of the customer.
The consumer champion’s view is supported by guidance on unfair contract terms from the Competition and Markets Authority (CMA), which states that “any purely discretionary right to set or vary a price after the consumer has become bound to pay is obviously objectionable”.
This is particularly because these terms also make it impossible for consumers to predict how much they will end up paying for broadband services when they sign a contract with Virgin Media.
Which?’s legal experts believe this also potentially amounts to a breach of the Consumer Protection from Unfair Trading Regulations, which prohibit unfair commercial practices, including misleading actions and misleading omissions.
Poor customer service
The problems with Virgin Media’s pricing practices are compounded by woeful customer service, with Ofcom already investigating claims the company has made it difficult for customers to cancel their services.
Virgin Media has also consistently underperformed in Which?’s annual broadband provider rankings – receiving just one star for customer service in this year’s survey.
Rocio Concha, Which? director of policy and advocacy, said: “Virgin Media is trying to have its cake and eat it by imposing eye-watering inflationary price increases while also giving itself the power to hike customers’ bills whenever it chooses. Which? believes this is not only unacceptable but potentially unlawful and Ofcom must investigate urgently.
“This should send a clear message to all telecoms firms that time is up for these unjustifiable inflation-linked, mid-contract price hikes. Providers should make a commitment now that they will not try to impose these increases next year, to reassure customers already struggling in a cost of living crisis that they will not face yet another unpredictable hit to their finances.”
What does Virgin Media say?
A Virgin Media spokesperson said: “We refute these baseless allegations in the strongest possible terms, which amount to a one-sided, selective and misinformed reading of widely-used contractual terms.
“We have always been open and transparent about any price increases. While we know that price changes are never welcome, against a backdrop of rising costs, increased usage and continued investment, we have already openly set out to customers that we are introducing inflation-linked price changes from April next year, which are widely used and give customers greater certainty about what to expect from their bills. Customers were given the right to cancel their contract within 30 days of receiving this notification.
“It’s very worrying that Which? is choosing to wilfully misrepresent our pricing practices. Our terms and conditions are very clear that inflation-linked price rises only apply to a customer’s monthly subscription charges and we have no plans to increase monthly bills multiple times within the same year. If separate out-of-bundle charges are increased at any point, then this would be clearly outlined and customers would receive a right to cancel.
“Our terms and conditions have been drafted in line with standard industry practice, consumer law and Ofcom guidelines, and we are extremely disappointed that Which? has decided to make misrepresented claims relating to a single provider, especially one that has made more effort than many to be transparent with its customers.”