Insights Inflation-linked mid-contract price rises: Ofcom proposes a ban


According of Ofcom, whilst over the last five years prices for broadband and mobile services have fallen in real terms while quality has improved, in 2023, against a backdrop of high inflation, prices for some services (new landline and standard broadband bundles) rose in real terms. Whilst price increases are not a problem as such, a growing number of subscription contracts from providers of phone, broadband and pay TV services state that the original price will increase annually by a figure equal to the rate of inflation plus an additional percentage, typically 3.9%. In Ofcom’s view, consumers on such deals cannot know for sure by how much the price they are contracted to pay will rise during their contract period. They would need to understand what the various rates of inflation mean, know how to find and predict inflation rates and calculate the actual price rise.

According to research, as of April 2023, four in ten broadband customers and over half of mobile customers were on contracts subject to inflation-linked price rises, and Ofcom reports that between January and October 2023 it received over 800 related complaints (almost double the volume received during the same period in 2021). As such, Ofcom concludes that the practice causes substantial amounts of consumer harm by complicating the process of shopping for a deal, limiting consumer engagement, and making competition less effective as a result.

Ofcom is therefore proposing to ban contractual terms which include inflation-linked price increases and any price increase that is set out in percentage terms. Instead, where a contract provides for a price increase during the contract term, it must be prominently set out in pounds and pence, together with information on when the increase will take effect.

Ofcom proposes to introduce this new rule in its General Conditions of Entitlement, the regulatory conditions that all providers of electronic communications networks and services must comply with if they want to provide services in the UK. The consultation paper explores whether relying on general consumer law, such as the unfair terms provisions in the Consumer Rights Act 2015, would address the harms Ofcom has found to exist as a result of inflation-link mid-contract price rises (an argument raised by some consumer bodies), but concludes that enforcement via consumer law is unlikely to achieve its objectives in a practical and timely manner. Hence it has exercised its power to address the issue via the General Conditions.

Ofcom expects to publish its final decision in the Spring of 2024 and the requirements would come into effect four months after that.

For more information and to respond to the consultation, which closes on 13 February 2024, click here.