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Ofcom is the government-backed regulator for the ‘communications’ industry in the UK – mostly responsible for broadcasting, telecoms and the postal service. A large portion of their work revolves around maintaining competition (linked to antitrust law) within the telecoms industry.
For example, early last year, they notably took aim at the cloud services industry in the UK, which they felt was being dominated by Microsoft and Amazon Web Services (AWS), who held a combined 70% share of the market in the UK. They will sometimes take action to block mergers and acquisitions (M&A deals) in the UK when they arise in such contexts.
The Communications Act 2003 gives Ofcom wide-ranging powers, including the ability to introduce new rules which are binding on the industry as a whole – which is exactly what they are doing now with the latest restrictions. While their powers are not unlimited (David Cameron famously criticised the body in 2009 and went on to reduce their duties slightly in the 2011 Public Bodies Act), they are still highly influential. More recent changes, including the Digital Economy Act 2017, for example, have increased their remit further.
Ofcom’s new restrictions are generally targeting providers of telecoms services including mobile phone contracts, TV subscriptions (for example those with a Virgin Media or Sky ‘box’), or broadband subscriptions (especially those providing WiFi in residential contexts). These are mostly large corporate organisations, many of whom will maintain decently sized in-house legal teams too. However, there are a few smaller, bespoke names present in the industry too.
From 17th January next year, any new plans across those platforms need to tell their customers in advance about price rises which will occur during the course of their contracts. Currently, many mobile phones contracts, for instance, will state that the provider can increase throughout the year a standard 3.9% + an additional amount for inflation. The government noted recently that some companies had increased prices by more than 14% as a result of increasing inflation, reaching its highest level in four decades.
This often meant unexpected hikes in consumers’ monthly bills further down the line. The Ofcom telecoms policy director stated that: ‘People need to have certainty about their monthly outgoings. But that’s impossible if you’re tied into a contract where the price could change based on something as hard to predict as future inflation’. Specifically, the terms laying out future price rises from the outset need to be written in an explicitly clear, customer-friendly way (‘prominently and transparently’).
These new rules were actually discussed years ago, but Ofcom did not begin an official consultation process (which revealed that around 60% of customers experienced such mid-contract price rises) until late last year. This has drawn some criticism from consumer groups like Citizens Advice. Towards the end of last year, Ofcom did reveal that the number of annual customer complaints it received regarding mid-contract price rises had essentially doubled.
Some consumer groups have noted that, while the change is welcome, it not only took too long, but also has not gone as far as some had hoped. In brief, the wording of the new rules have left the door open for terms like ‘prices may vary’ to be included in contracts, meaning future pricing might still not be entirely predictable.
Individuals looking to gain access to the legal industries (for example aspiring solicitors and barristers searching for training contracts, pupillage, etc) can take a number of points from this story.
Of course, there is a great deal of Public Law at play here. The way in which regulators and other public bodies interact with private bodies like telecoms companies is a process which law firms specialising in this area can advise on at length.
As already covered, the power given to bodies like Ofcom to set rules (without needing to go through a traditional lawmaking process via Westminster) is something to consider (and the extent to which this power can change over time). Law students studying Constitutional Law (a compulsory topic on the LLB or PGDL) will likely have encountered similar discussions before (albeit perhaps in other contexts).
Another area of interest here is Contract Law. Interestingly, this is not really a standalone practice area within law firms or chambers. Instead, it is simply a module studied as part of a legal education which feeds into a number of different practice areas in reality.
As should be evident here, the specific legal framework around contractual interpretation will be key to this story. For example, how explicit do the in-contract notices warning customers of future price increases need to be? It is likely future case law might shed more light on this point given how vague the wording of the new rules is as it stands (not uncommon across Westminster’s usual output, either).
Consumer law is another area of legal study (again, not an explicit practice area, though) which often hits the headlines. In reality, there are a lot of overlaps with Contract Law here in terms of the rights customers will have in these contractual contexts.
Lawyers also need to develop a good sense of commercial awareness too – especially those looking for opportunities at large corporate organisations (like a Magic Circle or elite US law firm, for instance). In this context, you might want to think about the balance between your clients maximising their income within the boundaries of the new regime, while still appearing ‘fair’ and maintaining a positive public image to their customers (a difficult tightrope to walk).
If customer confidence is eroded and the business struggles to keep subscriptions running as a result, having complied with the law (while necessary) will not save the business. Going ‘above and beyond’ is sometimes therefore the best approach.
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