CMA backs super complaint against loyalty penalties

The Competition and Markets Authority (CMA) has backed a ‘super complaint’ raised by Citizens Advice which suggests UK consumers are being ripped off by loyalty penalties on services such as broadband.

The super complaint was raised by in September by Citizens Advice, asking the CMA to investigate whether customers were effectively being punished by service providers, so called stealth price rises for example. The areas being called into question were cash savings, mortgages, household insurance, mobile phone contracts and broadband.

The CMA agrees with the points raised by Citizens Advice, suggesting the segments in question gain £4 billion a year through ripping off loyal customers.

“Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated,” said Andrea Coscelli, CEO of the CMA. “They shouldn’t have to be constantly ‘on guard’, spending hours searching for or negotiating a good deal, to avoid being trapped into bad value contracts or falling victim to stealth price rises.”

Looking specifically at the telcos, this is a frustrating point for many consumers. UK telcos show very little desire to reward customers, setting in processes and systems which make it impossible to leave. Many will give up on trying to navigate the red-tape maze as the poor experience proves to be favourable to the frustrations of trying to leave. By making this process as difficult as possible, the telcos don’t have to worry that much about retention and can instead focus on luring new customers.

The CMA has pointed this out during its own investigation, ensuring that one of the recommendations made to government and regulators will be to simplify the exiting process. This will intend to tackle the process, systems and the fees which customers face when attempting to secure a better deal.

It appears the telcos are much better at scaring customers away from exiting than enticing them to stay with positive customer service. Your correspondent can confirm this is the case after trying to end a Vodafone contract last year. It took a ridiculous amount of time, engagement with several staff who had no idea what they were doing (or was this trained in to make the process as painful as possible?) but the mission was stubbornly completed.

“We know that the better deals are often found by switching provider,” said Richard Neudegg, Head of Regulation at uSwitch.com. “But many companies make this more difficult by not being transparent enough about the options available or how to take your custom elsewhere. We are pleased to see the CMA identify this as an area for improvement, to ensure the power to get better deals is placed firmly in the hands of consumers.”

One specific complaints which has been firmly aimed at the telcos concerns subsidized handsets. The CMA highlights telcos should not be allowed to charge the same amount per month once the handset has been fully paid for. This will be a frustration from the consumer, but like the ridiculous nature of roaming fees, because the industry has stuck together little progress has been made.

Above all else, the CMA opinion adds to the already well-known position that telcos are not at all customer-centric organizations and have a lot to do if they want to be considered relevant for the digital economy.

CMA blocks Murdoch’s Sky high ambitions

The Competition and Markets Authority (CMA) has blocked Rubert Murdoch’s and Fox’s $11.6 billion attempt to full control of Sky on the grounds of media plurality.

In short, the CMA doesn’t want any one individual or organization controlling too many press outlets in the UK. It would not be in the public interest, according to the watchdog, due to the importance of diversity of publicly consumed information to the democratic process. Murdoch’s assets are already read, heard or watched by a third of the UK population, which is already a questionable amount in our own opinion.

“The CMA has provisionally found that if the deal went ahead, as currently proposed, it is likely to operate against the public interest,” the CMA said in a statement.

“It would lead to the Murdoch Family Trust (MFT), which controls Fox and News Corporation (News Corp), increasing its control over Sky, so that it would have too much control over news providers in the UK across all media platforms (TV, Radio, Online and Newspapers), and therefore too much influence over public opinion and the political agenda.”

This will certainly come as a blow to Murdoch and the Fox business, as this is a deal which has been in the making since December 2016. It was referred to the CMA in September by the Department of Digital, Culture, Media and Sport, over the concerns of media plurality, and this has been realised today. It is a clear message; no one individual or group should be able to influence public opinion to that extent.

Of course, there was a lot of hedging in the statements. The CMA praised Sky, Fox and Murdoch on its ability to inform the general public on the important issues of today, but irrelevant of precedent the CMA has to be on the lookout for nefarious intentions. Should one individual has such control over this many popular outlets, there is a risk of some stories being over hyped and some down played. Fake news might be a problem on social media, but it would be nothing if this many mainstream media titles started playing the same tune of euphoria and distraction.

This is not the end of the road however, as the CMA has put out a couple of suggested remedies to maintain media plurality, the first of which is simply banning the transaction and maintaining the status quo. The problem here is that should the CMA prevent the deal, there is a risk Sky News could be shut down. CMA has banned the closure of Sky News during the investigation, but there is a possibility of it happening. This is not a realistic solution, so we’re not too sure why the CMA is considering it.

Another possibility could be spinning off Sky News as its own standalone business. This might prove to be an interesting option for Murdoch considering the threat of extinction has been used as a bargaining chip to force through the deal. Why threaten the destruction on an asset when money can be made selling it off, achieving the desired result.

The final area is the deal with Walt Disney Company. During December, The Walt Disney Company announced that it was to acquire 21st Century Fox, after the spin-off of certain businesses, for $52.4 billion in stock. According to the CMA, this deal would weaken Murdoch’s hold over Sky, the root concern for media plurality, and therefore put the Fox/Sky deal back on the table. The door is not closed on this deal, but the CMA is not letting Murdoch do things his own way. One person having that much control over the media in one country is not a situation which should be allowed.

The Disney/Fox deal is of course subject to its own criticism and scrutiny from market watchdogs, so there might be a few nervous executives. A deal of this size usually hits hurdles in one or two markets around the world, so pinning the hopes of a controversial acquisition, on the success of another is certainly not an idea situation.