Legal Updates

Commercial Law – Rollover Contracts – Ofcom – General Conditions of Entitlement - Business Law

On September 13, 2011 Ofcom confirmed their ban on automatically-renewable contracts (“rollover contracts”) for landline or broadband services to residential customers and small businesses. 

Background

Such service contracts customarily have a minimum term during which customers are charged for early termination if they want to end the contract and switch supplier.

Unless the customer actually opts-out, the contract automatically rolls over to a new minimum term.

Ofcom’s concern was that the use of rollover contracts had the effect of reducing levels of consumer switching and thus lessening competition in the market.

Solution

Ofcom have decided to tackle this by widening Condition 9.3 of the General Conditions of Entitlement (“GCE”).

The GCE apply to all communications networks and service providers and imposes certain legal obligations on them. In broad terms, Condition 9 of the GCE specifies matters such as the service provider’s address, the nature of the services offered, prices, contract duration and dispute resolution procedures, amongst other things.

In March 2011, Ofcom proposed widening Condition 9.3 by adding that providers must not renew contracts with a further minimum term without first obtaining users’ express consent. Ofcom will implement its proposal in this way with the prohibition coming into force for new rollover contracts on December 31, 2011 and for existing rollover contracts on December 31, 2012.

RT Coopers are specialists in commercial law and the firm regularly reviews and drafts commercial contracts.

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© RT COOPERS, 2011. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.