In a significant move to uphold consumer protection rules, Ofcom has imposed a hefty £1.4 million fine on Shell Energy for its failure to properly prompt over 70,000 phone and broadband customers to review their contracts. The investigation revealed that Shell Energy violated crucial rules introduced by Ofcom in 2020, aimed at ensuring fair deals for communication service providers.
Ofcom’s General Conditions of Entitlement (GCs) require providers to proactively prompt customers before their contract expires, offering essential information to encourage them to explore better deals. Telecoms and pay-TV companies, including Shell Energy, must also issue ‘end-of-contract’ notifications to customers between 10 and 40 days before their minimum contract period concludes. Additionally, annual notifications are mandatory for customers outside their minimum contract period, containing ‘best tariff’ information to aid decision-making.
Shell Energy’s breach impacted a staggering 72,837 customers between March 2020 and June 2022. Failures included the omission of required notifications, as well as the issuance of notifications with inaccurate or incomplete information, attributed to manual errors and system failures. 7,750 customers received misleading end-of-contract notifications, resulting in 6,054 customers paying higher charges than originally quoted. This collective overcharge amounted to £398,417.67, with an average excess payment of £65.81 per affected customer.
Consequently, Ofcom levied a financial penalty of £1.4 million on Shell Energy, payable to HM Treasury within four weeks. The penalty, including a 30% discount for Shell Energy’s admission of liability, underscores the gravity of the breach.
Suzanne Carter, Enforcement Director at Ofcom, emphasised the importance of such rules, stating “Shell Energy’s failings represent a serious breach of our consumer protection rules and they must now pay the price. This sends a message to the whole industry that we won’t hesitate to step in on behalf of customers if they don’t play by the book.” The penalty therefore serves as a stark warning to the industry, reinforcing Ofcom’s commitment to protecting consumer rights.
Navigating the regulatory landscape: ensuring compliance with Ofcom’s General Conditions
The financial penalty, though mitigated by Shell Energy’s cooperation and corrective measures, signifies the severity of the breach, and sends a clear message to the industry that Ofcom will intervene to protect consumers and enforce Ofcom’s GCs related to contracts. These GCs extend their reach beyond individual consumers to encompass businesses as well.
For businesses, including explicit references to any potential Retail Price Index/Consumer Price Index (RPI/CPI) or other annual increases in contracts is recommended to pre-emptively address customer concerns. This proactive approach aligns with the ethos of compliance, reinforcing the commitment to transparent and fair dealings.
Furthermore, for businesses with ten employees or fewer, additional rights come into play, emphasising the importance of providing key contract information in writing, offering a concise contract summary, and ensuring that contract termination conditions do not discourage customers from switching providers. The duration of contracts, renewal consent, and clear communication regarding bundled services are integral aspects of these additional rights, underscoring the need for understanding and adhering to the comprehensive nature of the GCs.
Ofcom’s action in enforcing the consumer protection aspects of the GCs is a pivotal moment that echoes its commitment to intervene decisively to protect consumers and maintain the integrity of the industry.
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This article is written in English language. Preiskel & Co LLP is not responsible for any translation of all or part of its content into any language.