Are we entering an age of overcharging?

The post-COVID economy is reportedly threatening to raise the risk of customers being overcharged on their bills more than ever – how did we get here? And what can be done to protect customers?

The effects of the COVID-19 economic crisis are likely to continue to be felt for some time, with reports suggesting that consumers now find themselves increasingly vulnerable to overcharging.

The latest warning from the UK’s Competition and Markets Authority (CMA) is that business failures in the wake of the pandemic have diminished market competitiveness across the entire economy, and that the situation could worsen as government support is gradually withdrawn.

Market concentration has grown over the last 20 years, peaking in the aftermath of the 2008 recession. Today, concentration is 3 percentage points higher than in 1998, especially in the finance and insurance sectors, and the most profitable 10% of companies face the least competitive pressure.

Though this news may delight shareholders of these 10% of companies, for their customers, the situation isn’t so rosy – with fewer businesses to choose from, customers are more likely to fall prey to overcharging from those still trading.

Calculating how much a customer has overpaid on a single bill is simple, if you know how much they should have paid, and this should be addressed by standard billing and revenue assurance practices. However, when considering how much they might have overpaid due to wider market forces, things get rather more complicated and this is the domain of industry regulators and lawmakers.

Overcharge estimation is a delicate art, usually confined to dealing with cartels, but now, it’s increasingly being considered as part of post-COVID financial planning.

Earlier this year, we reported on O2’s £10.5 million fine, levied by Ofcom, for double-charging 140,000 customers on their final bills, a total of £2.4 million. Since then, O2 has had its merger with Virgin Media approved, following a long investigation by the CMA into whether this move would create “a substantial lessening of competition in one or more markets” if they raised prices or withdrew services.

As O2 provides the network for Giffgaff, Sky Mobile and Tesco Mobile, while Virgin provides leased lines to Three and Vodafone, the pair combined have a stranglehold on the UK mobile market. Moreover, the strong current offerings of the two will give them an edge when it comes to bundling services. In the end however, it was determined that the merger “is unlikely to lead to any substantial lessening of competition in relation to the supply of wholesale services.”

Industry regulators could soften their approach to market competition to encourage consolidation. Indeed, Robert Finnegan, Three’s CEO, has branded the UK market as a whole “dysfunctional” and in need of consolidation to deliver next-generation services to customers. He argues: “consolidation in the UK market would really serve the industry well, the government well in terms of its gigabit Britain strategy, and it would serve the customer well because it would enable a competitive environment.”

O2’s previously attempted merger with Three back in 2016 was blocked by the European Commission (EC) on the grounds that it would be bad for consumer choice and for the development of network infrastructure. However, the block was overturned last year.

Three’s holding company, CK Hutchison, said the decision “unfortunately acted as a brake on… vital industry consolidation in Europe which would have resulted in significant new investment, innovation and benefits for European consumers and industry.”

That same year, BT’s merger with EE caused similar concerns among rivals, but the CMA similarly determined the deal as unlikely to harm competition. Of course, BT are no strangers to overcharging, having been fined for excessive pricing for landline-only customers, who were receiving poor value for money compared to those paying for landline packages including broadband and pay TV.

In the US, a recent investigation into Charter Communications revealed that they have been charging customers more per month for slower speeds on streets in Rochester, NY where it faces no competition from other providers.

The overcharging problem isn’t limited to the telecoms industry either – Apple has faced demands for £1.5 billion of consumer compensation in a lawsuit accusing the company of overcharging App Store customers by up to 30% and generating “excessive” profits by limiting developers to using its own payment systems, forcing consumers to pay a premium on apps. Epic Games, the creators of Fortnite, has opened up a second legal battle against Apple, in an attempt to recoup some of the 30% commission that Apple takes from in-app payments.

Apple, along with Google, are now facing a CMA investigation into the “effective duopoly” they hold in the mobile market, and whether they are “stifling competition across a range of digital markets.”

What can be done to tackle this overcharging epidemic?

According to the CMA report, though the UK scores relatively well on consumer switching in some markets, it is at its lowest among low-income consumers, leaving many vulnerable to overcharging, with 40% of consumers reportedly shopping around less for better deals.

What’s more, the report found that the UK has a high incidence of consumer problems and “poor complaint handling” compared with its European neighbours.

In response to growing anger and frustration amongst consumers, Ofcom introduced legislation last year to tackle the “loyalty penalty” that is leaving so many long-time mobile and broadband customers out of pocket. An important step, but the issue of overcharging goes well beyond the confines of the telecoms industry and the geographic boundaries of traditional service providers.

In the digital world, the business rule book is being torn up by the global tech giants such as Amazon, Facebook and Google, requiring a coordinated international approach to regulation. We’re now starting to see this happen on corporation tax, but the irony is that this may well result in price hikes and the consumer having to pay even more.  
 
If you’re still struggling with charge calculation errors and revenue assurance issues, contact us today to find out how our Enterprise BSS/OSS suite can deliver a better billing experience for your customers.