Several major telecommunications providers have been called out for allegedly misleading millions of customers.
The operators, – Vodafone, EE, O2, and Three – were called to trial for accusations totaling a fine of over £1.1BN.
This case is a prime example of how an unhappy customer experience can have a profound negative impact on a brand.
The Alleged Claims
Announced earlier this week, the allegation claims that the mobile operators had abused their market power to overcharge their UK customers on 10.9 million phone contracts.
The complainant, Justin Gutmann, a Consumer Rights Champion, will serve as the Class Representative during the trial and has previously represented UK customers on similar overpricing issues.
Gutmann claimed these operators were charging their customers “loyalty penalties”, an extra cost for customers who had chosen to stay longer than their contractual obligations.
“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,” he explained.
“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.”
These contracts would typically be enforced on customers who had entered into a combined handset and airtime contract, a monthly-paid phone plan that covered the price of the device as well as service data and contact costs.
After the cost of the device had been effectively repaid back, customers who had voluntarily stayed on to continue paying the service contract had reportedly continued to pay the same amount without the operators offering a lower monthly fee.
This would sometimes include customers partaking in multi-year-long contracts, paying the same loyalty fee years after having paid the price of the phone or having partaken in the minimum contract period.
This ‘Loyalty Penalty Claim’ covers millions of contracts entered with these operators in the last 10 years, with the complainant asking for a compensation fee of at least £104 for each affected customer.
Qualifying customers who are included in the claim are eligible for this possible compensation scheme.
The issues surrounding loyalty payment charges have been consistently raised in the past decade by UK customers and other organizations advocating against the payment practice.
In 2018, a similar complaint was filed by Citizens Advice to the Competition and Markets Authority (CMA) against providers who had charged their customers the same fee after the minimum contract had expired, acknowledging that customers were allowed to “rightly feel ripped off, let down and frustrated.”
In September of the same year, they said: “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.”
The Long-Lasting Effects of a Negative Customer Experience
This claim highlights a major issue between business and consumer, and how one bad customer experience can set a brand back further than they think.
In several customer survey studies released in recent months, many noted there were far fewer loyalty-driven companies than expected, with 59% of customers admitting they would leave a brand entirely after one negative experience.
Furthermore, only 36% of customers reportedly agreed that enterprises were delivering consistent customer service, highlighting a significant disconnect between the leader and the consumer.
However, if one bad experience isn’t enough, 92% of customers admitted that they would abandon a brand completely after two or more negative experiences.
For many brands, loyalty is at the heart of their enterprise, relying on consistent customers as product consumers, word-of-mouth advertisers, and online PR.
These stats also show that companies that abuse this relationship with their consumers for immediate profit do face the consequences of these actions, as evidenced by their shortcomings in customer-facing areas.