By Emmanuel Oluebube, Bureau Chief, UK

UK TMT regulator Ofcom has  fined Shell Energy £1,400,000(US$1.8million) for not properly prompting more than 70,000 phone and broadband customers to review their contract, or letting them know what they could save by signing up to a new deal.

Ofcom’s investigation found that the company broke important consumer protection rules designed to ensure that customers get a fair deal for their communication services. These rules – introduced by Ofcom in 2020 – require that providers proactively prompt their customers before their existing contract is up and provide important information to help them shop around and take advantage of a better deal. They also require providers to remind their customers if they are already outside of their minimum contract period.

Specifically, telecoms and pay-tv companies must issue an ‘end-of-contract’ notification to customers – by text, email or letter – between 10 and 40 days before their minimum contract period comes to an end. They must also send notifications at least annually to customers who are already outside of their minimum contract period, reminding them that they are free to leave or change deal. Both notifications must include ‘best tariff’ information that will help customers understand whether they can save money by changing provider or signing up to a new deal.

Ofcom’s investigation

As per Enforcement Director at Ofcom, Suzanne Cater: “Our investigation found that Shell Energy broke our rules by failing to send the required end-of-contract notifications and annual best tariff notifications to some of its customers.

Specifically, we found that 72,837 customers were affected by Shell Energy’s failures between March 2020 and June 2022. In some instances, the company failed to send out end-of-contract notifications and annual best tariff notifications at all. In other cases, customers were issued with notifications that included inaccurate or incomplete information. This was caused by a combination of manual errors and systems and process failures at Shell Energy.

Notably, 7,750 customers received an end-of-contract notification that contained incorrect information about the price they would pay once their minimum term period came to an end. Of these customers, 6,054 went on to pay higher charges than they were originally quoted, collectively amounting to £398,417.67 – an average of £65.81 each.

Financial penalty and customer refunds

As a result, Ofcom has today imposed a financial penalty of £1,400,000 on Shell Energy, payable to HM Treasury within four weeks. This penalty includes a 30 per cent discount from the amount Ofcom would otherwise have imposed following Shell Energy’s admission of liability and agreement to enter into Ofcom’s settlement process.

In setting the level of financial penalty, we considered that this was a serious breach of our rules to protect customers. The penalty would have been significantly higher had Shell Energy not self-reported the contravention, co-operated closely with our investigation and proactively taken steps to remedy the breaches following discovery of the issue. In addition, Shell Energy has since made a number of changes to its systems and processes to help prevent future recurrence.

The company also moved quickly to refund affected customers and this exercise is now complete. Shell Energy decided not to issue refunds lower than £3 to ex-customers, and in lieu of this, has donated an equivalent amount to charity – this amount includes unclaimed refunds. Ofcom has required Shell Energy to make refunds available to these customers should they request it.

“Every day tens of thousands of customers come to the end of their phone or broadband contract and can make significant savings by switching provider or signing up to a better deal. That’s why our rules, which demand that providers prompt customers with the information they need to take action, are so important.

“Shell Energy’s failings represent a serious breach of our consumer protection rules and they must now pay the price. This sends a message to the whole industry that we won’t hesitate to step in on behalf of customers if they don’t play by the book.”