Court Hearing Begins in BT UK Landline Overcharging Case

Broadband ISP BT has today said it will “vigorously defend itself” – at the Competition Appeals Tribunal (CAT) – against the claim of having allegedly overcharged c.2.3 million landline-only customers, which has been brought by law firm Mishcon de Reya on behalf of a former Ofcom telecoms consultant, Justin Le Patourel.

The case is focused on the fallout from Ofcom’s 2016/17 review of the associated market (here and here), which found that landline-only customers (i.e. those who didn’t take a cheaper broadband bundle) had been “getting poor value for money compared to those who buy bundles of landline, broadband and/or pay-TV services.”

At the time, Ofcom noted that customer bills for line rental had risen significantly since 2009, while at the same time BT’s costs (wholesale) for providing it had fallen over the same period. One catch here is that this largely reflected monthly line rental, but not so much the fall in calling volumes that hit related revenues (a key weighting factor for operators when setting retail prices).

Naturally, Ofcom put some pressure on BT to respond, and the operator did so in 2018 by voluntarily cutting the line rental charge for c.900,000 vulnerable landline-only customers (reduction of £7 per month), while at the same time capping any subsequent overall increases to line rental and call charges to inflation (here) – this was recently extended (here).

The CAT Hearing

The new case is thus based around the somewhat retrospective allegation that BT were overcharging around 2.3 million landline-only customers between 2015 and 2018 (a limitation in the collective litigation rules prevent this being dated all the way back to 2009). If successful, the case could force BT to pay out over £500m in compensation to consumers (or around £200 to £500 each).

We first reported on all of this in January (here), and today sees the start of the CAT’s official hearing (expected to last several days), which will decide whether the case should proceed to a full trial. Another key question is whether Mishcon de Reya will be granted authorisation by the Tribunal to act for all the BT customers who were allegedly overcharged (i.e. relevant customers could be automatically represented).

A BT Spokesperson said:

“We strongly disagree with the claim being brought against us.

We take our responsibilities to customers very seriously and will defend ourselves against any claim that suggests otherwise.

We take pride in our work on the Customer Fairness agenda. For many years we’ve offered a discounted social tariff in what is a competitive market with competing options available, and this month we are extending that to help a potential four million households on low incomes, save on bills and stay connected to vital online services.

We assure our customers that we will not let this claim disrupt the relationship BT has with them. We will continue to support our customers through the pandemic and beyond.”

Consumers will no doubt see the case as having some merit, but it’s worth remembering that Ofcom’s original statement made no official finding of excessive pricing or breach of competition law more generally. Admittedly, it’s unclear whether that would have changed had BT not made such a commitment, but the fact is they did and so any prospect of a legal clash was avoided.

BT then made the change to its pricing voluntarily, which was accepted by Ofcom, and we shouldn’t forget that broadband ISPs and phone providers have the freedom to set retail pricing however they so choose – albeit often restricted by the realities of competition.

The case isn’t just of interest to BT, since many other broadband ISPs and phone providers were happily charging (or overcharging) similarly high prices for retail line rental during that same period, even though they didn’t have to do so. Suffice to say that there will be quite a few industry eyes casting a glance toward this case over the next few days.

Another risk, should the case succeed, is that it might discourage operators from making similarly pro-consumer voluntary commitments on pricing in the future, for fear of leaving themselves exposed to such claims. The likely outcome of that would be a rise in the number of legal cases that Ofcom have to fight in order to reach their desired outcome.