Which? Accuse ISP Virgin Media UK of Unlawful Customer Contracts

A team of legal experts at Which? have today accused broadband ISP Virgin Media (VMO2) of potentially breaching consumer contract law by “effectively [maintaining] a licence to impose unlimited [price] increases” through their Terms & Conditions (T&Cs) for existing customers. The consumer magazine wants Ofcom to investigate.

The issue appears to centre around a long-standing clause in Virgin Media’s T&Cs, which states the ISP can “change our charges at any time“. The clause was maintained earlier this year after the provider updated their terms to “introduce an annual inflation linked price rise based on the Retail Price Index + 3.9%” (here), which mirrors the approach that was already being taken by all the other major broadband providers (O2 and Virgin Mobile already adopt this approach).

The policy change is due to come into effect from April 2024 and is then effective from April each year. But it will also make it harder for customers to exit their contract penalty free when the new hikes hit in the future, which is because customers gain more forward transparency over the forthcoming price rises (even though many consumers still find ‘inflation’ linked hikes confusing).

Which? believes both clauses amount to “unfair contract terms” and could be in breach of the Consumer Rights Act 2015 by creating “a significant imbalance” between the rights Virgin Media has granted itself and those of the customer. The view seems to be 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“.

The organisation claims 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 (we assume because the RPI rate can’t be 100% known until February each year). 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.

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.”

Which? has called on Ofcom to proceed with an urgent investigation of Virgin Media, which they hope could be concluded before next year’s RPI linked round of price hikes hit in April 2024. The consumer magazine also warns that some of the other major broadband ISPs should be probed over similar terms, but it remains to be seen whether the regulator will take any action.

However, Virgin Media has strongly rejected “many” of the claims, describing some as a “deliberate misrepresentation of the facts“, and others as being just “simply incorrect“. The provider states that Which? is misrepresenting a separate clause in their T&Cs, which does not specifically relate to customers’ monthly subscription charges, but instead to other out-of-bundle charges (e.g. out-of-allowance and admin charges).

Virgin notes that their T&Cs are also written almost identically to those of other broadband ISPs and has thus questioned why Which? decided to single them out (the consumer magazine said they did this because Virgin allegedly represents “the most egregious example of unacceptable price hiking practices,” which Virgin deny). Finally, Virgin said there is categorically no plan to increase customers’ bills multiple times within the same year.

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.”

Just to be clear about one thing. Virgin mentions above that “customers were given the right to cancel their contract within 30 days of receiving this notification“, although this refers to the price notification they issued earlier this year (this allowed existing customers to cancel without penalty), rather than any future price hike notifications. The existing terms do have a standard 30-day cancellation clause too, but crucially that is NOT a penalty free cancellation for those still within their minimum term.

At this stage it remains unclear whether Ofcom will find enough cause to investigate Virgin Media, but they’re already investigating the ISP after customers complained that the “company is making it difficult for them to cancel their services” (here). The regulator is currently also in the process of reviewing whether inflation-linked mid-contract hikes give customers “sufficient certainty and clarity about what they can expect to pay” (here) and a verdict is expected later this year.

An Ofcom spokesperson said:

“We will consider – and respond to – the issues that Which? has raised. We already have an enforcement programme open into whether telecoms firms have previously been complying with our rules, which state that mid-contract price rises must be set out clearly before customers sign up. We are also reviewing whether inflation-linked, mid-contract price rises give customers sufficient certainty and clarity about what they can expect to pay. We will report on both of these later this year.”

We suspect Ofcom would be more likely to force a general industry change, via new guidelines, than to target Virgin Media specifically over Which?’s accusation.