Virgin Media to appeal Ofcom’s Early Termination Charge ruling

 

16 November 2018

 

 

 

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Virgin Media strongly disagrees with the decision taken by Ofcom today. We believe it to be both unjustified and disproportionate. The Company will now appeal Ofcom’s decision in the Competition Appeal Tribunal. 

 

Early Termination Charges (ETCs) are widely used by businesses across a number of sectors to calculate the payment due should a customer decide to leave before the end of their agreed contractual term. 

 

Between September 2016 and August 2017, Virgin Media mistakenly overcharged 1.5% of its 5.5 million cable customers.  This clearly should not have happened and we have taken a number of steps to make sure that it does not happen again.  We carried out a full review of our systems and processes, which included introducing a new automated ETC calculator for our Customer Care Agents as soon as we could.  We have also improved customer communications, updated our website and made our policy easier to understand.

Virgin Media has always informed both existing and potential customers that our contracts apply over a specific period, that ending a contract early may result in a fee being charged and that they should consider the length of contracts before entering into them. Rolling 30 day contracts are also available for customers who want more flexibility and do not wish to sign up for a fixed period, such as 12 months.

 

Tom Mockridge, CEO of Virgin Media, said: “We profoundly disagree with Ofcom’s ruling. This decision and fine is not justified, proportionate or reasonable.

“A small percentage of customers were charged an incorrect amount when they ended one or more of their services early and for that we are very sorry.

“As soon as we became aware of the mistake we apologised and took swift action to put it right by paying refunds, with interest, to everyone affected. For those few people we could not locate, we have made an equivalent donation to charity.  We also reviewed our internal processes and systems, and improved our customer communications to make sure that this does not happen again.

“We wholeheartedly reject the claim by Ofcom that our ETC levels dissuaded customers from switching.


“This unreasonable decision and excessive fine does not reflect the swift actions we took, the strong evidence we have presented, or our consistent, open and transparent cooperation with the regulator.  We will be appealing Ofcom’s decision.”

ENDS

 

Note to Editors

 

What happened

This error occurred when the rate card used to calculate an ETC was not updated in September 2016 when our minimum contract length changed to align with the discounted period.

 

Why Virgin Media is appealing this decision

While Virgin Media unintentionally overcharged a small percentage of customers, we acted quickly to refund those affected, with interest, and resolve the underlying issues which caused the problem. Ofcom has not reflected the swift action taken to put right an honest mistake.

Ofcom alleges that this issue resulted in a disincentive to customers who wished to switch or change their package. The extensive evidence we have provided to Ofcom shows that the effect of the overcharging on customers’ decisions to leave was negligible. A point both Virgin Media and independent economists have made to Ofcom. None of the 82,000 customers identified changed the choices they made due to the incorrect ETC calculation.

Virgin Media has admitted its mistake and corrected it. Ofcom’s decision and fine is manifestly disproportionate because it does not recognise the actions taken by the company.

Clear information and contract flexibility

Early Termination Charges (ETCs) are commonplace throughout British businesses across a number of sectors.  They enable consumers to pay lower recurring prices spread across the term of the contract rather than having to pay higher upfront costs. Ofcom has not objected to a charge being made when a customer wants to leave their contract ahead of the minimum term expiring.

There are a number of processes and features in place that give our customers flexibility over their contract as well as transparent charging information.

  • We have updated the information presented on our website to ensure our ETC policy is as clear as possible for customers to understand and we have introduced a new automated rate calculator (end of October 2018).
  • We inform customers that our contracts are designed to apply over a specific period and that they should consider the length of contracts before entering into them and that early disconnection fees can apply.
  • We also offer 30 day rolling contracts for those that do not want to sign up for a minimum period, such as 12 months, because they need more flexibility e.g. if customers are considering moving home (as VM does not cover the whole of the UK).
  • For customers moving home to areas in which they can still receive Virgin Media services we have slightly adapted our policy so that we no longer require them to re-contract so long as the services taken are not changed.