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‘Loyalty penalty’ class action claim launched against four largest mobile firms

File photo dated 03/01/18 of a mobile phone.
File photo dated 03/01/18 of a mobile phone.

Vodafone, EE, Three and O2 are facing a “£3 billion plus” class action claim that alleges the firms used their market dominance to overcharge on up to 28.2 million UK mobile phone contracts.

Justin Gutmann, a former executive with Citizens Advice, and law firm Charles Lyndon claim the UK’s four largest mobile phone network operators charged “loyalty penalties”, leaving existing customers paying more than new customers for the same services.

It specifically claims that long-standing customers were overcharged for handsets beyond the end of their contractual term.

Mr Gutmann alleges the firms overcharged on up to 28.2 million contracts and is seeking damages of at least £3.285 billion.

If successful, a consumer who bought a contract made up of a mobile phone and services such as data, minutes and calls with just one of the mobile operators could receive as much as £1,823, he said.

When these contracts are agreed, their price during the minimum term of the contract includes the cost of both the phone and the use of airtime services.

The claim alleges that the firms failed to reduce the overall amount charged once the minimum contractual term expired, despite the fact that consumers had already paid off their phones.

This resulted in existing customers being charged more than a new customer would be if they were just paying for airtime services.

The class action has been filed with the Competition Appeal Tribunal in London.

All qualifying consumers will be automatically included in the claim for free unless they follow specific steps to opt out.

The claim follows a “super complaint” from Citizens Advice to the Competition and Markets Authority (CMA) in September 2018, which resulted in the CMA finding that: “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.”

Mr Gutmann said: “I’m launching this class action because I believe these four mobile phone companies have systematically exploited millions of loyal customers across the UK through loyalty penalties, taking over £3 billion out of the pockets of hard working people and their families.

“These companies kept taking advantage of customers despite the financial crisis of 2008, Covid and now the cost-of-living crisis. It’s time they were held to account.”

An O2 spokesman said: “To date there has been no contact with our legal team on this claim. However, we are proud to have been the first provider to have launched split contracts a decade ago which automatically and fully reduce customers’ bills once they’ve paid off their handset.

“We’ve long been calling for an end to the ‘smartphone swindle’ and for other mobile operators to stop the pernicious practice of charging their customers for phones they already own.”

An EE spokeswoman said: “We strongly disagree with the speculative claim being brought against us. EE offers a range of tariffs and a robust process for dealing with end of contract notifications.

“The UK mobile market is highly competitive space with some of the lowest pricing across Europe.”

Vodafone said: “This has just been brought to our attention and we don’t yet have sufficient detail for our legal team to assess.”