Restrictions on broadband and mobile providers to prevent unpredictable price hikes

The Malta Communications Authority (MCA) has introduced restrictions on mobile and internet providers to prevent unpredictable increases in consumer fees and charges.

Starting January, mobile and internet providers will be required to include ‘price indexation clauses’ in new contracts, limited to six months.

Consumers with contracts that already include such a clause will have the right to terminate contracts without incurring early termination fees if the provider increases its prices after six months from the contract signing date.

In a statement, the MCA said several providers have in recent months introduced clauses in subscriber contracts that allow them to adjust charges or fees based on an objective consumer price index compiled by a public institution.

These clauses are referred to as “price indexation clauses”, which restrict consumers from terminating contracts without incurring early termination fees upon such adjustments.

The MCA was seriously concerned by the lack of consumer awareness around these clauses, which could lead to unpredictable increases in fees and charges.

It also said that this practice hunders the consumers’ ability compare tariff plans, distorting effective competition in the market.

In light of this, the MCA introduced the following requirements for providers of internet, TV, mobile and fixed telephony services:

• Maximum contract duration of contracts with 'price indexation clauses' limited to six (6) months, effective from 8th January 2024.
• Providers may offer plans with a commitment period of up to twenty-four (24) months, provided they exclude 'price indexation clauses'.
• Providers must obtain explicit consent from consumers before concluding contracts with 'price indexation clauses,' effective from 8th March 2024.
• Enhanced transparency obligations for contracts and websites publicising plans with price indexation clauses, effective from 8th March 2024.

With regards to existing contracts with price indexation clauses:

• After six (6) months from the contract signing date, consumers have the right to terminate contracts without incurring early termination fees if providers implement price changes based on the indexation clause.

These price indexation clauses were central to a ruling by the Court of Justice of the European Union, which determined that consumers do not have the right to withdraw from their contract without early termination fees if the provider increases prices resulting from a price indexation clause.

The MCA encouraged providers to offer consumers the option to rescind contracts without penalties in case of price revisions due to indexation clauses, made within the first six months from the signing of the contract.

“The Authority considers that such a voluntary undertaking by providers would be consistent with the objective of ensuring fair and transparent contractual practices in the sector.”