Broadband installation charges: do I have to refund a consumer for these?
Do you provide Internet access services to consumers? Are you worried about consumers asking you to provide the service before the end of the statutory cancellation period, only to then cancel, leaving you to foot the bill for installation costs?
If so, you'll want to read this blogpost, as the Court of Justice of the European Union has set out some principles you need to follow to maximise your chances of success.
Background: distance contracts, and a consumer's right to cancel
(Skip this if you're familiar with the right to cancel under the The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.)
By way of background, The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out various requirements which you, an Internet access provider looking to enter into online agreements with consumers, need to satisfy.
One of things relates to the "right to cancel". I've got more information here, but here's an even shorter summary.
Providing a service during the cancellation period:
You are not permitted to begin to supply a service to a consumer before the end of the statutory cancellation period, as a result of an online order, unless the consumer has made an express request for you to do so.
If a consumer makes an express request for you to supply the service before the end of the cancellation period, you are permitted (but not required) to do so.
Cancellation having made an express request for supply during the cancellation period:
If a consumer makes an express request for you to supply the service before the end of the cancellation period, and you choose to do so, the consumer still has the right to cancel until the service has been fully performed.
However, assuming that you have provided the consumer with relevant information as part of your information provision obligations under the Regulations, if a consumer cancels during the cancellation period, they are required to pay an amount for the supply of the service for the period for which it is supplied (until you are informed of their decision to cancel).
This amount must be "in proportion to what has been supplied, in comparison with the full coverage of the contract".
But what is "in proportion"? In proportion to what?
Time-based proportion v service-based proportion
The Court of Justice of the European Union ruled this week on the issue of "in proportion", in the PE Digital case (C‑641/19).
Now, this isn't a case about broadband installation (it was about an online dating service) but, in my view, the principles in the case will apply to a consumer buying a Internet access service remotely (e.g. via your website or over the phone).
"Bundled" or "blended" services
The court determined that the services comprising the online dating service consisted of a principal service, and some ancillary services.
However, the court decided that "the contract at issue did not provide for a separate price for any service that could be regarded as separable from the principal service provided for in that contract."
In other words, the services were bundled together, into one contract, with one blended price.
In respect of these services, the court ruled that
in order to determine the proportionate amount to be paid by the consumer to the trader where that consumer has expressly requested that the performance of the contract concluded begin during the withdrawal period and withdraws from that contract, it is appropriate, in principle, to take account of the price agreed in the contract for the full coverage of the contract and to calculate the amount owed pro rata temporis.
The conclusion is that, if a contract provides for multiple services under one bundled price, the trader is entitled to withhold from its refund to the consumer only a time-based pro rata'd sum. (For example, if the contract is for 365 days, and the consumer cancels after 10 days, they only have to pay total price for a year / 365 x 10.
It does not matter if part of the services provided early on in the relationship are more expensive to provide, or are worth more to the consumer: if the services are bundled together, and are provided for one price, the determination as to how much the consumer has to pay is taken solely on a time basis.
But what if you split them out?
The court went on to say:
It is only where the contract concluded expressly provides that one or more of the services are to be provided in full from the beginning of the performance of the contract and separately, for a price which must be paid separately, that the full price for such a service should be taken into account in the calculation of the amount owed to the trader...
This sentence is a bit hard to parse, but I think it is saying that, if you want to maximise your chances of withholding an amount for installation, you need to:
- set out expressly in your contract that the installation service:
- will be provided in full from the beginning of the performance of the contract (or, perhaps, at some specific point after that?); and
- is separate from the ongoing connectivity service
- charge a separate price for the installation service
- the court says that the price "must be paid separately". I think this means "it must be a specific line item", made clear to the consumer that it relates to, and only to, installation fees, rather than "the consumer must transfer it to you in a specific payment".
- The latter is closer to the literal wording of the judgment, but the former is still consistent with the intention of the provision.
- If you wanted to be sure, you'd probably be sensible to take the charge for installation as a separate payment.
- record the consumer's express request that they want those services to be performed within the cancellation period
In short, it looks like you should unbundle the installation services, get confirmation from the consumer that they want those services to be provided within the cancellation period, charge a separate price for them, and make it clear that that separate price is for installation services.
Otherwise, even if the consumer requests performance of the contract within the cancellation period and you incur costs installing their service, if they cancel the service after you've incurred those costs and before the end of the cancellation period, it doesn't look like you can retain those installation costs.
How we can help you
Got a contract which needs reviewing? Want to revisit your ordering process, to make sure it's clear enough? Feel free to get in touch.