Ofcom punishes Virgin's dubious subscription practices

A £28 million fine has been handed to Virgin Media for repeatedly preventing customers from cancelling subscription contracts.

Ofcom, the UK communications regulator, handed the fine to Virgin Media in enforcement of the Digital Markets, Competition and Consumers Act (DMCCA)

Pippa Garden, trainee solicitor in our commercial team, explores Ofcom’s investigation into Virgin Media, the outcome and what businesses can learn from this case.

The investigation

Ofcom launched an investigation into Virgin Media’s alleged failure to comply with Ofcom rules and consumer protection legislation. It concluded that, over a three-year period, Virgin Media customers experienced:

• excessive and unnecessary call transfers between agents
• deliberate disconnection of calls by call handlers
• repeated attempts to pressure customers
• significant periods kept on hold

Ofcom determined that Virgin Media deployed these tactics to prevent or delay customers from switching to better broadband, landline or TV packages. More worryingly, Virgin’s commission scheme “effectively encouraged” call centre agents to behave in this way.

What was the outcome?

Ofcom issued Virgin Media with a £28 million fine for breaching consumer protection laws.

While the fine is substantial, Ofcom said that it took into account that Virgin Media admitted its failings and was cooperative in agreeing a settlement. The fine imposed by Ofcom includes a 30% reduction for this.

What does the case mean for subscription businesses?

In the UK, there are roughly 155 million active subscriptions at any one time, accounting for approximately £26 billion worth of consumer spending per year and data shows that more and more businesses are choosing to supply goods and services on a subscription basis.

It is vital that businesses offering subscription-based payment methods ensure that they are compliant with consumer legislation.

The Digital Markets, Competition and Consumers Act 2024 (DMCCA) sets out a variety of rights for consumers in relation to subscription contracts. The Competition and Markets Authority (CMA) have made it clear that they intend to come down hard on businesses who fail to comply and Virgin Media’s fine only serves to reinforce this.

As a minimum, the CMA expects businesses to:

• Ensure it is straightforward for consumers to exit contracts (ideally it should be as easy to exit a subscription contract as it is to enter one)
• Allow consumers to exit a subscription online if they signed up to it online
• Offer a 14-day cooling off period after a trial of 12 month+ contract auto-renews (during which the consumer can cancel without penalty)

For guidance on how to ensure your subscriptions are DMCCA compliant, or consumer law advice more generally, please contact David Wozniak, associate in our commercial team on [email protected] or 0191 211 7831.