The firm failed to prompt its 70,000+ broadband and phone customers to review their contracts or inform them they could possibly get a better deal elsewhere
Ofcom has fined Shell Energy £1.4 million 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 the consumer protection rules it introduced in 2020 that require providers to prompt their customers before a contract ends. Providers are also obliged to help them secure a better deal and to remind their customers once the minimum contract period ends.
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 ends.
They must also send notifications at least annually to customers whose contract term has ended to remind them they can leave or swap deal. Both notifications must include ‘best tariff’ information to help customers understand if they can save money by changing provider or signing up to a new deal.
Ofcom’s investigation
Ofcom’s investigation found that some 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
Ofcom has imposed a financial penalty of £1.4 million on Shell Energy, payable to HM Treasury within four weeks. This penalty includes a 30% discount from the amount Ofcom would otherwise have imposed as Shell Energy flagged the errors to the regulator and entered its settlement process.
The company also quickly refunded customers. Shell Energy decided not to issue refunds lower than £3 due to former customers, but instead donated an equivalent amount to charity. This sum 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.”
Ongoing investigation
Ofcom is also in the midst of an investigation to establish whether mid-contract abuses are being committed by service providers: it launched a review of in-contract price rises in April. This followed a public backlash and criticism from consumer rights groups of price hikes above the rate of inflation. It is due to set out its findings by the end of this year and what action, if any, it will take.