Monitoring and enforcement programme: General Condition 9 (requirement to offer contracts with minimum terms)

CW/01082/01/12

Complainant: Ofcom own-initiative monitoring and enforcement programme
Investigation against: Communications Providers (CPs) offering fixed line telephony, mobile, and broadband to consumers
Case opened: 25 January 2012
Issue: Compliance with the requirements under General Condition 9 relating to contracts between CP's and consumers and fairness of related contract terms
Relevant instrument: General Condition 9 of the General Conditions of Entitlement ("GC 9") and Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCRs").

Update note – 24 January 2013

Ofcom has decided to extend this Programme for a further six months. Our work to date has identified a number of concerns regarding some CPs' compliance with GC9 and the UTCCRs. We continue to monitor complaints in this area and will consider whether enforcement action is required in order to address our concerns.

We intend to write to all the CPs considered in our review in order to make them aware of any concerns.

CPs should also be aware that the prohibition on automatically renewable contracts (ARCs) came into force at the start of this year. All residential and small business customers should no longer be in automatically renewable contracts and should have been migrated from such contracts by 31 December 2012. We will continue to review relevant consumer complaints to ensure compliance with this obligation and take any action as appropriate.

As described in our update of 3 January 2013, we have published a consultation document on the issue of addressing consumer harm from price rises during fixed term contracts and intend to publish a statement, following the consultation which will close on 14 March 2013. Following the update on 16 January 2013 announcing the publication of a breakdown of the complaints data as part of the consultation, we have today published, on an anonymised basis, a full breakdown of the data following a further request from a stakeholder. More details here.

Update note – 16 January 2013

Ofcom has today published further data as part of its consultation on price rises in fixed term contracts published on 3 January 2013. This provides a breakdown of 1,644 consumer complaints examined by Ofcom about price rises between September 2011 and May 2012, following a request from a stakeholder for further information.

Ofcom has also amended a figure in paragraph 4.5 on page 20 of the consultation. This reported that 266 of 1,644 consumers complaining to Ofcom about price rises did so because they consider it ‘unfair’ that the price can change when they are tied into a fixed term. The correct figure is 407 of 1,644 consumers and the appropriate change to paragraph 4.5 in the consultation document has now been made and published on the website.

End of update note

Update note - 3 January 2013

Ofcom is today consulting on how to protect consumers from price rises during fixed contracts for landline, broadband and mobile services. More details can be found here.

Ofcom is inviting stakeholders’ views on all the options put forward for consultation to address this issue.

The consultation closes on 14 March 2013 and we expect to publish a decision in June 2013.

End of update note

Update note - 18 October 2012

Ofcom today announced plans to consult on how to protect consumers from unexpected price rises within fixed contracts for landline, broadband and mobile services.

As part of this programme we have been considering mid-contract price increases and we have identified a number of issues with the effectiveness of the current rules with which communications providers have to comply, and the potential for consumer harm.

The consultation, which we will aim to publish by the end of the year, will consider whether current price variation terms in fixed-term contracts are appropriate. It will look at related issues including the transparency of price variation terms, and the information provided to consumers at the point of sale.

End of update note

Update note - 26 July 2012

Ofcom has decided to extend this Programme for a further six months. Our work to date has identified various issues in relation to the effectiveness of GC9 and compliance with both GC9 and the UTCCRs. In particular, we have received numerous complaints from customers in relation to price increases during fixed term contracts. Which? has also submitted a formal complaint to us in relation to this issue. We will publish more details of the next steps we will be taking in an update to this bulletin entry after the summer.

End of update note

Ofcom has launched an enforcement programme to monitor CPs' compliance with the provisions in GC9 following changes made to implement:

the revised EU electronic communications framework in May 2011, and
Ofcom's decision in September 2011 to prohibit automatically renewable contracts ("ARCs").

GC9 sets out the requirement to offer contracts with minimum terms. The condition includes requirements relating to the provision of information, the length of contracts and the conditions for termination.

Our objectives for this programme are:

To identify any problems (including consumer concerns) in relation to CPs' compliance with GC9 and, where appropriate, the UTCCRs.
To identify any problems raised by CPs in relation to the interpretation of the provisions in GC9.

On 23 May 2011, and following public consultation, Ofcom issued a statement (http://stakeholders.ofcom.org.uk/consultations/gc-usc/statement) following its review of the General Conditions and Universal Service Conditions (http://stakeholders.ofcom.org.uk/binaries/consultations/gc-usc/summary/gc-usc.pdf). The review and subsequent modifications to the relevant Conditions took account of the changes to the Universal Service Directive (USD).

Amongst other changes, Ofcom made modifications to GC9. The key changes to GC9 were:

CP's to provide additional information in their contracts with consumers and also make this information available to other end-users on request;
the maximum duration of initial consumer contracts will be 2 years; and users generally must be offered an option to contract for the provision of public electronic communication services for a maximum duration of 12 months;
subscribers must be able to withdraw from contracts penalty-free following a notice of any materially detrimental contract modifications, and
contract termination conditions and procedures for termination must not act as a disincentive to end-users from switching their providers.

In addition, GC9 was further modified in September 2011 to take account of Ofcom's decision to prohibit automatically renewable contracts to residential customers and small businesses with no more than ten employees in the fixed voice and broadband sectors. (http://stakeholders.ofcom.org.uk/binaries/consultations/arcs/statement/ARCs_statement.pdf)

Under this programme, Ofcom will collect information from CP's, and also review relevant consumer complaints data, in order to monitor compliance and take any action as appropriate.

Ofcom may initiate separate investigations of named providers. Where we do so, these will be announced via Ofcom's Competition and Consumer Enforcement Bulletin.Alternatively, we may move directly under this programme to take enforcement action where, for example, Ofcom has reasonable grounds for believing that a CP is contravening GC9. In that case, Ofcom will announce its action via an update to this Bulletin entry.

Case Leader: Carmen To ( e-mail: carmen.to@ofcom.org.uk)
Case Reference: CW/01082/01/12