Ofcom has today fined Shell Energy £1,400,000 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 toensure 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
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% 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.
Suzanne Cater, Enforcement Director at Ofcom,
said:“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.”
