Virgin Media has introduced inflation-based annual mid-contract price rises but also allows for prices to be increased at any time. We have raised this with Ofcom, the telecoms regulator, as we believe it’s the most egregious example of unacceptable price hiking practice across the broadband industry.
However, Virgin Media is not the only provider that may be relying on questionable terms and conditions to justify inflationary price hikes. We have also urged the regulator to assess all relevant telecoms providers for compliance with consumer protection legislation.
What is the issue with Virgin Media’s contracts?
Earlier this year, Virgin Media announced it would make a change to its terms and conditions – from April 2024 it will introduce inflation-based price rises that mean the amount its customers pay for their broadband will increase every year.
But we’re concerned Virgin Media’s terms are an attempt by the firm to both have its cake and eat it. As well as applying aggressive inflation-linked annual mid-contract price rises, it’s also maintaining the right to hike bills further at any time.
That discretionary price rise clause has been part of Virgin Media contracts for some time, but the new terms also allow for annual price rises based on the retail price index (RPI) rate of inflation plus an additional 3.9% while removing the right for affected customers to cancel without paying substantial exit fees.
We believe these clauses 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 its customers.
This position 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 can make it impossible for consumers to predict how much they’ll end up paying for broadband services when they sign a contract with Virgin Media.
Which? has asked Ofcom to proceed urgently with an investigation into Virgin Media, so that action can be taken to prevent millions of customers facing unfair inflation-linked mid-contract price increases in April 2024. Ofcom could demand that Virgin Media drops its unfair terms and ultimately ask a court to declare them unlawful and unenforceable, and to prohibit further unfair pricing practices. A court could also order Virgin Media to refund money to consumers who signed up to unfair contracts.
The problem with inflation-based mid-contract price rises
Inflation-based mid-contract price rises, like those Virgin Media has introduced, are an issue on their own, trapping customers in a lose-lose situation where they are forced to pay higher tariffs or pay pricey exit fees to escape.
Virgin Media’s plans are particularly concerning because it will be the only major broadband provider to use the retail price index (RPI) as the basis for its increases, rather than the consumer price index (CPI) - RPI is typically higher than CPI. This is the same rate imposed on Virgin Mobile and O2 Mobile customers, who this year faced hikes as high as 17.3% on airtime.
The Office for National Statistics (ONS) discourages the use of RPI, saying it’s not a good measure of inflation and is likely to overstate it. It says any use of RPI over other indices (such as CPI) should be ‘closely scrutinised’.
Inflation-based mid-contract price rises make it impossible to tell how much you will end up paying over the course of your contract when you sign up, particularly given an increasing number of the broadband contracts on offer are 24 months long. It would take a crystal ball to tell what inflation will be in early 2025, for example.
Recent Which? research found that only one in 20 consumers were capable of estimating what impact an inflation-linked mid-contract price rise would have on their monthly telecoms bill.
If Virgin Media wrote to you about the change in terms, it should have given you a 30 day window to end your arrangement with Virgin Media if you didn’t wish to accept the new terms. If you received that letter, the window given by Virgin Media to switch away is likely to have closed by now. However, your price won’t change (by RPI+3.9%) until April 2024.
Virgin Media says the new terms will also apply to customers who are re-contracting, as well as new customers.
If you’re considering re-contracting with Virgin Media, you should weigh up the pros and cons as we’ve suggested for customers considering switching.
Should I still switch to Virgin Media?
You’ll need to carefully weigh it up - Virgin Media offers some of the fastest speeds available, but it’s facing an increasing amount of competition. This is partially thanks to the increasing availability of full fibre connections including from smaller, localised full fibre networks. But the options available depend entirely on where you live - some customers may only be able to access ultrafast speeds (100Mbps or more) via Virgin Media.
Keep in mind that a price that might seem attractive now will increase in April next year. You won’t know the exact extent of that increase until February 2024 when the relevant RPI rate of inflation has been announced. Some Virgin Media contracts are 24 months long so if you switch now, the amount you pay will go up yet again in April 2025.
Ofcom is already reviewing inflation-linked, mid-contract price rises amid concerns that they do not give consumers sufficient certainty and clarity about what they can expect to pay. However, we are concerned that the review is not expected to conclude in time to affect increases next April and are calling on all providers to stop the practice, irrespective of the outcome of the review.
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?
Virgin Media said it refuted our accusations ‘in the strongest possible terms’ adding that the contract terms in question are widely-used in the broadband industry.
It argued that it is ‘transparent’ about its price rises, which come against a backdrop of rising costs and investment in its infrastructure. It believes its RPI-based mid-contract price rises will give customers ‘greater certainty about what to expect from their bills’ and said customers were given the right to cancel their contracts within 30 days of receiving the notification that it would introduce inflation-based price changes from April 2024.
Virgin Media also told us that inflation-linked price rises only apply to a customer's monthly subscription charges, it has no plans to increase monthly bills multiple times within the same year and customers will be given the right to cancel their contract if out-of-bundle charges are ever increased. It said that its terms and conditions have been drafted in line with standard industry practice, consumer law and Ofcom guidelines.
What does Ofcom say?
Ofcom said it will consider – and respond to – the issues that Which? has raised.
It pointed out that it already has an open enforcement programme exploring whether telecoms firms have previously been complying with its rules, which state that mid-contract price rises must be set out clearly before customers sign up.
It is also reviewing whether inflation-linked, mid-contract price rises give customers sufficient certainty and clarity about what they can expect to pay and will report on both issues later this year.
If you're out of contract, keep in mind that you don't have to accept any price rise – you're free to shop around to find a better deal. In many cases you'll find that it will save you money, and you may get a better service. But check the T&Cs of any new contract carefully so you're aware of your new provider's policy on price rises – particularly if you’re signing up to a long contract.
Some providers commit to keep your prices the same for the duration of your contract – this includes Hyperoptic, Utility Warehouse and Zen Internet. And while Sky and Now Broadband have both recently raised prices for some customers, both have avoided putting clauses covering above-inflation rises in contracts, allowing their customers to haggle or switch when they’re notified of an increase.
If you're already struggling to pay your bills or have concerns about the impact of price rises, make it a priority to speak to your broadband provider.
News, deals and stuff the manuals don't tell yousource https://www.which.co.uk/news/article/which-asks-ofcom-to-investigate-virgin-media-contracts-over-fears-they-could-break-the-law-amnSZ2v5sN12