Can Vodacom legally increase contract fees?

28 March 2015 - 12:11 By Wendy Knowler
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Vodacom branding on the Ponte Building in Hilbrow, Johannesburg. File photo.
Vodacom branding on the Ponte Building in Hilbrow, Johannesburg. File photo.
Image: Gallo Images/Foto24/Felix Dlangamandla

How dare they?

That pretty much sums up the sentiment of Vodacom’s contact subscribers, on hearing that the network is to increase its tariffs on five of its plans - Vodacom Smart, uChoose Smart, uChoose Flexi, Top Up and Mobile Broadband packages - from May 1, on both new and existing contracts.

Cell C did something similar in February.

Vodacom spokesman Richard Boorman said the hikes were unavoidable due to several factors, but said he understood consumers’ “frustration”.

Outrage is probably a more accurate description. Many have ranted about the tariff hikes on social media, arguing that subscribers can’t take it upon themselves to change a vital term of the two-year contact they signed, so why should the network have the right to?

“Can Vodacom legally do this?” I’ve been asked repeatedly on Twitter and via email.

Well, the short answer is yes. It’s in the Vodacom contract, and there’s nothing in the Consumer Protection Act to stop them. A CPA regulation states that a company may alter the prices relating to a existing contract, provided the consumer has the right to cancel.

This is the bit of Vodacom’s contract which “allows” the company to hike tariffs on existing contracts: “The charges levied by Vodacom may vary from time to time and Vodacom shall provide you with at least 20 business days notice of such variations before they take effect. 

“You shall be bound to pay such varied charges with effect from the date of publication thereof ... unless you exercise your right of termination as provided for in this agreement.”

Ah, so you can cancel. Here's what Vodacom’s contract says about that: “You may terminate this agreement … by giving Vodacom at least 20 business day’s notice in writing…subject to payment of a reasonable premature cancellation charge, determined by Vodacom.”

The Consumer Protection Act allows companies to decide what a “reasonable” cancellation charge is, and in Vodacom’s case, it’s up to 75% of the subscriptions for the remaining period of the contract.

I put it to Boorman that being charged that much to cancel - in a lump sum - pretty much ruled out cancelling as a protest action for most disgruntled Vodacom contract subscribers.

“The ‘up to 75%’ is the extreme case of a contract being cancelled early on in the contract term,” he said. “This reflects the fact that the handset, which can’t be returned and resold, makes up a significant portion of the contract fees. 

In fact, he said: “A customer does have the right to unilaterally cancel a contract at any point, without paying punitive fees.”

The cancellation fee may not be “punitive”, but in most cases it is too steep - thanks to the cost of smartphones - to make cancellation a practical option.

It’s true that for individual subscribers, the increases are not all that significant. 

But the fact that subscribers don’t have the same power to take it upon themselves to change the terms of their two-year contract, offends most people’s sense of fair play.

It may be legal, and commercially justified, but it’s deadly for loyalty and goodwill.

Contact: consumer@knowler.co.za

Twitter: @wendyknowler

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