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Consumer complaint against 3 about unfair contract terms

From Ofcom

Complainant: A member of the public
Complaint against: Hutchison 3G (UK) Ltd (“3”)
Case opened: 9 January 2006
Case closed: 2 May 2006
Issue: Alleged unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999 (“the Regulations”)

Ofcom received a complaint in relation to a term in 3's Cellular Service Standard Agreement.

Ofcom has considered the terms and conditions contained in all the documents that constitute the Cellular Service Standard Agreement (“the Contract”) and has now closed its investigation. In relation to all but one issue raised by Ofcom under the Regulations, 3 has amended its contract to the satisfaction of Ofcom (for details see below). In relation to one further issue concerning the font size of the terms and conditions, Ofcom has reserved its position. Ofcom will revisit this issue in the event that any evidence arises of potential or actual unfairness to the detriment of consumers.

(i) Clause 2.1 of 3's terms and conditions required consumers to agree to terms in all documents produced by 3, including those 3 might publish in future.

Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations (“the Schedule”), because the terms could irrevocably bind consumers to agreements with which they had no real opportunity of becoming acquainted. Ofcom also regarded this term as potentially unfair under paragraph 1(j) of Schedule 2 of the Regulations, because the clause could allow 3 to bind the consumer to any changes they chose to make to the terms.

3 has agreed to amend the term to:

“Your agreement is made up of the Terms for 3 Services and your Price Plan, along with any other terms laid down in selected Additional 3 Services on the Handset. Additional terms may apply to any promotional or special offers.”

(ii) Clause 3.6 of the Care3 Terms section of the contract, and clause 5.4 of the Terms for 3 Services explained the circumstances and process through which handsets locked to the 3 network would be unlocked.

Clause 5.4 of the terms and conditions further explained the process by which 3 would unlock handsets locked to their network: if customers wanted to have their phone unlocked, their account needed to be up to date, and the price paid for the handset would be the full retail value of the handset. If these requirements were met, 3 would then arrange for the handsets to be unlocked, for a fee.

Ofcom considered these two terms to be potentially unfair under paragraph 1 (i) of Schedule 2 of the Regulations, and paragraph 5(1) of Schedule 2 of the Regulations because they created an imbalance between 3 and consumers, by making reference to the consumer's liability to pay the full handset price, without clearly explaining the circumstances in which this would apply and how it would be implemented. The use of words such as “title” in the term also appeared to be potentially unfair under Regulation 7, which requires the use of plain, intelligible language.

3 has agreed to change the terms to:

“Handsets which can be used to access 3 Services are locked to our network. The software in the Handset and all intellectual property rights in that software is owned by the Handset manufacturer and you are being allowed to use the software on a limited licence from the Handset manufacturer. During the term of your agreement for the supply of 3 Services, you must not permit your Handset to be unlocked via any unauthorised manner (i.e. by anyone other than us or the Handset manufacturer). You must contact us if you want your Handset to be unlocked from our network. If you contact us to request that your Handset be unlocked from our network, we will arrange for your Handset to be unlocked in an authorised manner (which may include replacing your Handset with an unlocked Handset which is the sam e or similar specification to your Handset) and you must pay an unlocking administration charge (which will be shown in the Price Guide for 3 Services). In addition, if you have had your Handset for less than 12 months, you will also have to pay the Handset Unlock Fee (this is also shown in the Price Guide for 3 Services). In addition, you must ensure that there are no outstanding amounts owing on your 3 account. Prior to us arranging for your Handset to be unlocked, you must ensure that you back-up or otherwise store separately any of your information or other data on the Handset which you may require, as this may be lost during the Handset unlocking process. We are not responsible for any information or other data which may be lost during the Handset unlocking process.”

(iii) Clause 6.7 of 3's terms and conditions stated that 3 might publish an acceptable use policy providing more detail about the rules for use of certain 3 Services, that, if 3 did publish such a policy, it might amend it from time to time, and that consumers could view it on 3's website or request a copy from 3 Customer Services.

Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, as it did not give consumers a reasonable opportunity of becoming acquainted with either the existence of an acceptable use policy, or any change in that policy, which forms part of their contract. The term did not require 3 to directly inform consumers of any such changes.

3 has agreed to amend the term to:

“We may publish an acceptable use policy which provides more detail about the rules for use of certain 3 Services in order to ensure that use of 3 Services is not excessive, to combat fraud and where new 3 Services we may introduce require certain rules to ensure they can be enjoyed by our customers. If we publish a policy, we will let you know – such a policy may be amended from time to time - for instance, if we discover that the 3 Services are being used fraudulently or for fraudulent purposes, or the excessive use of certain 3 Services is causing problems for 3, its systems, or for other users or if we introduce new services which may require certain rules to ensure that such new services can be enjoyed by our customers, again, we will let you know if this happens”.

(iv) Clause 6.10 of the 3 terms and conditions stated that, while it had no obligation to monitor the Messaging Services or Storage Services, 3 reserved the right to remove or refuse to send or store content on customers' behalf if customers exceeded 3's use limits or 3 became aware of any “issues” with customers' use of these services.

Ofcom considered this term to be potentially unfair under paragraph 1(i) Schedule 2 of the Regulations, as it did not clarify the types of issues referred to.

3 has agreed to amend the term to:

“While we have no obligation to monitor the Messaging Services or Storage Services, if you exceed our use limits set out in our fair use policy (which is published as part of our Price Guide and is available on our website or from 3 Customer Services) or we are made aware of any issues with your use of these 3 Services (for example, if we are made aware that you are using 3 Services in any of the ways prohibited in section 6.8 above), we reserve the right to remove or refuse to send or store content on your behalf.”

(v) Clauses 6.17 and 9.2 of 3's terms and conditions stated the circumstances in which 3 might suspend or disconnect services to Pay Monthly Customers, if customers failed to pay their account on time or did not have enough money in their account.

Ofcom regarded these clauses as potentially unfair under paragraph 1(e) Schedule 2 of the Regulations as they appeared to allow for 3 to suspend or disconnect the service of a late paying customer without notice.

3 has agreed to amend clause 6.17 to:

“As described in section 6.14 above, we will send you a bill on a periodic basis, which will usually be monthly. The bill will state the amount of the Charges due from you and the due date by which you must make payment. If you fail to pay your account on time, you will be breaking your agreement and we may Suspend or Disconnect you. In this case, you will have to pay any outstanding Charges. We may also set a credit limit for you if you fail to pay your account on time – we will let you know what the credit limit on your account is and, if you exceed the limit we set, we may Suspend any or all of the 3 Services you use. You should not use the credit limit for budgeting as the amount you owe is not capped or limited by any credit limit we set.”

3 has agreed to amend clause 9.2 to:

“If you are a Pay Monthly Customer, in addition to the circumstances set out in Section 9.1, we may also Suspend any or all of the 3 Services you use without notice if:

• you have not paid our Charges on time, or if you have previously failed to pay your Charges on time and we have told you that we have set a credit level for you (as set out in Section 6.17 above) and you have exceeded that level of credit;

• you have insufficient credit in your account to cover charges you agreed to pay in advance.”

(vi) Clause 9.1b of 3's terms and conditions stated that 3 might suspend its services without notice in the event of continued excessive use of the services by a consumer, after being advised by 3 that such use of the service was causing problems for other users.

Ofcom regarded this as a potential breach of paragraph 1(i) of Schedule 2 of the Regulations, in that it did not clarify the meaning of “excessive use”.

3 has agreed to amend the term to:

“(b) we advise you that your excessive use of 3 Services (as may be defined in accordance with clause 6.7 above) is causing problems for other users, and you are continuing to use 3 Services excessively;”

(vii) Clause 9.1e of 3's terms and conditions which deals with the Suspension of Services stated that if 3 received a serious complaint against a consumer, the consumer would be dealt with as stated in the “Your Rights – Complaints” section of the terms and conditions.

Ofcom considered that clause 9.1e needed to explain what was considered to be a “serious complaint”; otherwise the clause may have been considered a hidden term, and a potential breach of paragraph 1(i) of Schedule 2 of the Regulations.

3 has agreed to amend the term to:

“We may Suspend any or all of the 3 Services you use without notice if:

(e) we receive a serious complaint against you which we believe to be genuine (for example, if we receive a complaint that you are using 3 Services in any of the ways prohibited in Sections 6.5, 6.8 and 6.11). If this happens, we will deal with the complaint in the manner set out in Section 7;”

(viii) Clause 9.4 of 3's terms and conditions stated that 3 might turn off Messaging Services if they are inactive for an extended period of time, and that 3 would have no obligation to maintain any of the content in a consumer's Messaging Services, or to forward any unopened or unsent messages to the consumer or anyone else.

Ofcom regarded the lack of clarification of what “extended period of time” meant as equivalent to a hidden term. Ofcom considered that this term represented a potential breach of paragraph (i) of Schedule 2 of the Regulations.

3 has agreed to amend the term to:

“We may turn off your Messaging Services if they are inactive for an extended period of time – we will let you know before this happens. If we do turn off your Messaging Services, we will have no obligation to maintain any of the content in your Messaging Services, or to forward any unopened or unsent messages to you, or anyone else.”

(ix) Clause 10.3 of 3's terms and conditions stated that, once connected to 3, consumers could not end the agreement using means such as the Consumer Protection (Distance Selling) Regulations 2000.

Ofcom regarded the reference to statutory provisions to potentially breach Regulation 7, which states that contracts should be expressed in plain, intelligible language.

3 has agreed to amend the term to:

“Once you are Connected to 3, you can only end this agreement in the ways set out in this Section 10. However, if you are a consumer, any statutory rights which you may have, which cannot be excluded or limited, will not be affected by this section. For more information on your statutory rights, contact your local authority Trading Standards Department or Citizens Advice Bureau.”

(x) Clause 12.3 of 3's terms and conditions stated that nothing in the agreement limited or removed 3's liability for fraud, death or personal injury caused by their negligence or for any liability which cannot be limited or excluded by applicable law, and that the consumer's statutory rights were not affected.

Ofcom regarded the phrase “your statutory rights are not affected” as a potentially unfair under Regulation 7, which states that contracts should be expressed in plain, intelligible language.

3 has agreed to amend the term to:

“Nothing in this agreement removes or limits our liability for fraud, for death or personal injury caused by our negligence or for any liability which can't be limited or excluded by applicable law. If you are a consumer, the terms of this agreement will not affect any of your statutory rights which you have, which cannot be excluded by this agreement. For more information on your statutory rights, contact your local authority Trading Standards Department or Citizens Advice Bureau.”

(xi) Clause 14.1 of 3's terms and conditions stated that 3 would consider that information updates published on 3's website or sent directly to the consumer by phone, text message, electronic messaging or e-mail had been received by the consumer.

Ofcom regarded this term as a potential breach of Regulation 1(i) of Schedule 2 of the Regulations as, by not actively ensuring that consumers had received updates, it could bind them to an agreement with which they had no real opportunity of becoming acquainted. Ofcom considered that this was equivalent to the inclusion of hidden terms in the agreement and was therefore potentially unfair.

3 has agreed to amend the term to:

“Our website is a great source of information that you may find useful when using our services – it is the most up to date source of information about 3 and its services. You may find it useful to refer to when using our services.”

3 has also added this further clause to the terms and conditions:

“If we need to send any notices under this agreement to you, we will do this by communicating them to you via phone, text message, electronic messaging, email or mail using your most recent contact details given to us (if any).”

(xii) Clause 15.1 of 3's terms and conditions stated that the agreement was governed by English law, and that the two parties agreed to only bring legal action about the agreement in a UK court.

Ofcom regarded this clause as potentially unfair because consumers should be entitled to have their legal rights considered by a local court and subject to local law, regardless of where they live in the UK. The clause therefore represented a potential breach of paragraph 1(q) of the Regulations which states that terms excluding or hindering the consumer's right to take legal action are potentially unfair.

3 has agreed to amend the term to:

“This agreement is governed by English law unless you live in Scotland in which case, it will be governed by Scots law. Each of us agrees to only bring legal actions about this agreement in a UK court;”

(xiii) Clause 15.4 of 3's terms and conditions stated that 3 could assign or transfer its rights and obligations under the consumer's agreement to a party which agreed to continue complying with 3's obligations under the agreement. No other person (other than 3's assignee, if any) could benefit from this agreement under the Contracts (Rights of Third Parties) Act 1999.

Ofcom considered that this term insufficiently protected the rights of consumers in the event of the agreeement being transferred to a third party, particularly if there was no provision to allow for consumers to terminate the agreement without penalty. Ofcom considered that this term was potentially unfair under paragraph 1(p) of Schedule 2 of the Regulations.

Ofcom also regarded this clause as potentially unfair under Regulation 7, which states that contracts should be expressed in plain, intelligible language.

3 has agreed to amend the term to:

“We may assign or transfer our rights and obligations under your agreement to a party who agrees to continue complying with our obligations under this agreement, provided that your rights under the agreement or any guarantees given by us to you are not affected. No other person (other than our assignee, if any) may benefit from this agreement.”

The font size in the Contract is noticeably smaller than in the rest of the documents in the information bundle given to new customers. Ofcom considered that this could be potentially unfair under Regulation 7, which states that a seller or supplier shall ensure that any writtern term of a contract is expressed in plain, intellegible language.

However, in the absence of a specific complaint or evidence of consumer detriment, Ofcom has reserved its position in respect of the size of the font. Ofcom will revisit this issue in the event that any evidence arises of potential or actual unfairness to the detriment of consumers and, if necessary, take formal enforcement action under the Unfair Terms in Consumer Contract Reguations 1999.

On the basis of the above, Ofcom has closed the investigation.

It should be noted that Ofcom does not have the power to "clear" terms under the Regulations. Only a court has the power to determine whether a term is unfair under the Regulations. Ofcom is therefore able to consider any further complaints regarding this or any other contractual terms and conditions.

Case Leader: Beverley Kotey (020 7783 4558 email: beverley.kotey@ofcom.org.uk)
Case Reference: CW/00888/01/06

Text published when the case was opened

Consumer complaint against 3 about unfair contract terms

Complainant: A member of the public
Complaint against: Hutchison 3G (UK) Ltd (“3”)
Case opened: 9 January 2006
Issue: Alleged unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999

Ofcom has received a complaint about contract terms in 3's Cellular Service Standard Agreement , and is investigating whether any terms may be potentially unfair.

Case Leader: Beverley Kotey (tel: 020 7783 4558 e-mail: beverley.kotey@ofcom.org.uk)
Case Reference: CW/00888/01/06

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