A consumer sparked the investigation by making a complaint about
UK Online's terms and conditions. The exact nature of the complaint
is not revealed; but a spokesman for Ofcom told OUT-LAW that once
it decides to investigate a complaint of unfairness in a consumer
contract, it is obliged to look at the whole contract. Following
Ofcom's review, several changes have been made by UK Online.
You are deemed to understand and accept…
The original contact said that, by subscribing to UK Online's
broadband service, consumers were deemed to have both understood
and accepted "the following" terms and conditions and agreed to
follow them. This wording is common to many consumer contracts; but
it was not to Ofcom's liking. Citing the Unfair Terms in Consumer
Contracts Regulations of 1999, Ofcom observed that, "by agreeing to
such a declaration at this point, the consumer may have been denied
a proper opportunity to read and understand all the terms."
The Office of Fair Trading (OFT) has warned e-tailers
before against telling consumers to tick a box saying "I have read
and understood the terms and conditions" – as the consumer may not
have read or understood them. Instead, ask them to check a box
indicating that they accept the terms and conditions, suggests the
OFT – and highlight the importance of reading them.
UK Online agreed with Ofcom to change the clause to refer, with
links, to its Acceptable Use Policy and Fair Usage Policy and to
state: "Your use of the Service will be governed by the terms of
the Agreement and we expect you to read through the terms
carefully."
Your statutory rights
As with the recent investigation into 3's small print, UK Online
was rebuked for the clause: "These terms and conditions do not
affect your statutory rights." This was legal jargon, said Ofcom,
not plain, intelligible language of the sort expected by the 1999
Regulations.
The new and approved clause states that the terms "do not affect
your rights under law." And if you want to know what these rights
are, UK Online follows 3 in suggesting within the clause that you
contact your local Citizens' Advice Bureau.
Exclusion of liability
It was not acceptable to Ofcom that UK Online attempted to
eliminate liability for delay in providing its service – so the
exclusion was dropped.
Acceptable use policy
Consumers were expected to agree to comply with an Acceptable
Use Policy; but the Policy was not readily accessible to the
consumer reading the contract. So UK Online added a URL for the
Policy to the top of the contract.
Deletion of messages
If the customer cancelled his account, UK Online's contract said
it would delete messages in the mailbox. Not good enough, said
Ofcom: the destruction of data without notice potentially caused a
significant imbalance between the rights of the consumer and UK
Online, to the detriment of the consumer. So UK Online changed the
clause to provide that, if the mailbox has not been accessed for 60
days, that will represent a cancelled account and all mail will be
deleted "upon notice by us to you and no further incoming mail will
be received."
Indemnity
For third party software provided to customers, UK Online's
conditions said: "You shall indemnify us against all claims,
liability, damages, costs, expenses, including legal fees, incurred
or suffered by us arising out of any non-compliance" with the
software licence agreements. Another clause forced consumers to
indemnify UK Online for any breach of the consumer contract.
These indemnity clauses created an imbalance between UK Online's
rights and obligations and the consumer's, said Ofcom. They also
contained legal jargon and could have been deemed an excessive
penalty. So UK Online ditched the indemnities.
Similarly, a reference to warranties was simplified after
Ofcom's intervention.
Penalty for late payments
A daily interest charge on late payments, at 4% above the base
lending rate of Barclays Bank, was reduced by 3% for being
"disproportionately high".
Consequential losses
An attempt to exclude liability for indirect, special or
consequential losses, loss of profits, business interruption and
loss of data, losses caused by any virus, denial of service,
spamming or hacking was deemed potentially unfair – because "it
inappropriately excluded the legal rights of the consumer against
UK Online." So the exclusions were deleted.
Termination
The termination clause was diluted because it allowed immediate
termination without notice if either party breached the agreement.
This was subsequently qualified.
Changes to the contract
UK Online was allowed to modify the contract at any time by
emailing changes to consumers. But this did not give consumers a
right to terminate if the changes were to their disadvantage. So
the wording was amended accordingly: if the consumer reasonably
considers he has been disadvantaged by a change, he can cancel.
English law
As with 3's conditions, a reference that English law applied and
that the English courts had exclusive jurisdiction was deemed
potentially unfair. Now it is qualified: Scots law applies to
customers in Scotland and lawsuits can be brought in England,
Scotland, Wales or Northern Ireland.
Lessons for others
Ofcom's spokesman denied that this was part of a campaign for
plain English. "We're required to take a case-by-case approach," he
said. "Our role is tightly defined."
He also pointed out that 3 was not the first case report of its
kind. Last year, similar investigations on unfair terms were
conducted into O2 and Talk Talk, for example.
Struan Robertson, editor of OUT-LAW, said: "Despite these cases,
the use of some contractual wording that met with Ofcom's
disapproval is common. This suggests that awareness of Ofcom's
interpretation is low; yet Ofcom has no remit to change that, other
than reporting its investigations on a case by case basis."
Robertson suggested that the Office of Fair Trading and the
Department of Trade and Industry could liaise with Ofcom to agree a
common position on best practice in consumer contracts. "They could
then endeavour to bring that to the attention of the wider business
community," he said.
