EE and Virgin Media fined for ripping off customers when they leave early

UK telecoms regulator Ofcom has fined EE and Virgin Media millions of pounds for excessive early-exit charges.

Churn (loss of customers) is a constant worry for communications service providers and the best way to reduce it is to provide such a good communications service that subscribers don’t want to leave. Another way is to make it so odious and costly to leave that most people just can’t be bothered with the hassle and it seems EE and VM went a bit too far with the latter strategy.

Ofcom says it’s OK for CSPs to attach conditions to the early exit from contracts, but that those must be ‘clear, comprehensive and easily accessible’. Furthermore Ofcom stipulates “Communications providers shall ensure that conditions or procedure for contract termination do not act as disincentives for end-users against changing their communications provider”. It thinks thinks that’s what happened with EE and VM, which is why it has fined them £6.3 million and £7 million, respectively.

“EE and Virgin Media broke our rules by overcharging people who ended their contracts early,” said Ofcom’s spectacularly-named Director of Investigations and Enforcement, Gaucho Rasmussen. “Those people were left out of pocket, and the charges amounted to millions of pounds. That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.”

VM doesn’t see it in quite the same way and is appealing the ruling. “We profoundly disagree with Ofcom’s ruling,” said Tom Mockridge, CEO of Virgin Media. “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.”

EE hadn’t sent us a statement at time of writing, nor had it issued a press release. Read into that what you will but the fact that Ofcom reduced its fine by 30% in return for it not kicking up a fuss would seem to be significant.

Mockridge’s moan can be interpreted in a few ways. Taken at face value it’s easy to feel some sympathy. If indeed it was a small, innocent mistake that VM moved to correct as soon as it was aware of it, then the fine does seem excessive. If, however, VM knew what it was doing and thinks it should be able to get away with it just by saying sorry after it was caught, then it doesn’t.

At the very least the relative fines seem disproportionate. EE over-billed 400,000 of its customers for a total of £13.5 million in early exit charges over a six year period, while VM only rinsed 82,000 of its punters for £2.8 million in less than a year. Surely the scale of EE’s breach was far greater and it looks like it’s being too generously rewarded by Ofcom for its capitulation.