Vodafone, EE, Three and O2 could be forced to pay out £1.141 billion in compensation over alleged overcharging after a class action lawsuit was launched against the mobile providers. If the claim were to succeed, the millions of customers affected could receive compensation of up to £104 each. It is alleged that the named providers overcharged millions of users by not adjusting customers' phone bills once their handsets had been paid off.
The case could potentially affect as many as 10.9 million UK mobile phone contracts, though the number of customers is expected to be lower, as one person could have held multiple contracts with different providers over the relevant period of 1st October 2015 to 31st March 2025.
Justin Gutmann, the consumer rights advocate who brought the claim, said: "For far too long the phone companies have been taking advantage of their loyal customers. That's why it's time to stop the immoral practice of loyalty penalties.
"Now that we have approval to proceed with our Loyalty Penalty Claim, I look forward to bringing the claim to court and putting money back into the pockets of those consumers who need it to help ease cost pressures in their family budgets."
What is a class action lawsuit?
A class action lawsuit is when an individual or a small group takes legal action on behalf of a much larger group, all with similar claims. They are used as a way for a large number of customers to bring cases against big companies or, as in this case, groups of companies.
In this case, it is consumer rights advocate Justin Gutmann and the law firm Charles Lyndon launching the action on behalf of millions of mobile phone users who were allegedly overcharged. The claim is expected to cover approximately 10.9 million active contracts from 1st October 2015 to 31st March 2025. This timeframe was set by the Competition Appeal Tribunal, which rejected the original proposed start point of 2007.
Every qualifying customer will be automatically included in the claim for free, unless they follow specific steps to opt out.
What is the action about?
The aim of the lawsuit is to challenge the practice of providers charging a 'loyalty bonus' by keeping existing customers' bills high while offering cheaper deals to new customers for the very same service.
Specifically, the case relates to mobile phone contracts that bundled a handset with airtime services (data, texts and calls). The price of these deals covered the cost of using the airtime services and buying the handset itself. Once the handset is paid off at the end of the deal, the customer owns it and is free to move to a SIM-only deal that only charges for airtime services, either with their existing provider or a new one. The named providers are accused of failing to reduce the cost of the deals once the minimum term ended, and the phone had been fully paid off, essentially billing customers for a phone they already owned outright and did not need to pay for, rather than moving them onto an appropriate SIM-only deal. As a consequence, these existing customers were left paying far more than the providers were charging new customers for SIM-only deals.
The case follows a similar premise to a September 2018 super-complaint from Citizens Advice to the Competition and Markets Authority (CMA). In that case, the CMA concluded: "We do not consider that providers should continue to charge customers the same rate once they have effectively paid off their handsets at the end of the minimum contract period. This is unfair and must be stopped."
How have Vodafone, EE, Three and O2 responded?
In response to the case, a spokesperson for O2 said: "At this early point in the proceedings, we welcome the Competition Appeal Tribunal's ruling that the majority of the claim has no basis to be brought, significantly reducing its scope.
"We maintain that there is no merit to Mr Gutmann's case for the remaining period and will continue to robustly defend our position as it proceeds."
A spokesperson for EE said: "We do not accept the substantive allegations of the claim. Our priority is, and always will be, to provide a great experience for our customers."
Vodafone and Three are part of the same company. A spokesperson said: "We are disappointed with the Tribunal's decision to certify the claim. We will review the judgment in detail before considering next steps. We will continue to robustly defend this claim."
What to do if you think you are being overcharged by your mobile provider
If the minimum term on your phone contract has ended and your price has not reduced, you should contact your provider. There is no reason to keep paying a higher price if you already own the handset and can switch to cheaper deal.
It is easy to switch providers if your minimum term has ended and you are not happy with your current service or bill. We explain how to haggle, shop around, tailor your plan and more in our article 'How to save money on your mobile phone bill'.
You could also check out our articles 'How to complain about UK energy bills' and 'How to haggle to get a better broadband deal' to learn more about cutting the costs of your other household bills.
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