Ombudsman Diana Kovacheva sent a letter to the Minister of Economy and Industry Bogdan Bogdanov whereby she insisted that the interests of mobile service consumers be protected in a new indexation and price increase, this time for 2024.

30 January 2024

30 January 2024

Ombudsman Diana Kovacheva sent a letter to the Minister of Economy and Industry Bogdan Bogdanov whereby she insisted that the interests of mobile service consumers be protected in a new indexation and price increase, this time for 2024.

Prof. Kovacheva pointed out the need for an objective analysis of unfair business practices and sale methods, unequal terms and conditions of contracts and the explanation of the reasons why mobile operators this year again would take advantage of the opportunity to increase their prices by their indexation.

The reason for the Ombudsman’s recommendation is the intention of Vivacom Bulgaria EAD for a next year in a row to have an indexation of the services tariffs, with an increase of 4.3%, which is equal to the 2023 inflation index as announced by the National Statistical Institute (NSI).

“As you may know, this problem was brought to the attention of the institutions last year and then I expressed a firm opinion against the indexation of the prices of mobile services to adjust to inflation. I put forward specific arguments which now I have to bring to your attention again, as I think they are well-founded but ignored due to economic interests, to the detriment of the Bulgarian citizens,” the Ombudsman wrote.

Prof. Diana Kovacheva insisted that as per Article 3 (2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, that reads:

”A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract…”

She pointed to the fact that it is common knowledge that the customers of mobile service operators cannot influence the substance of the contracts with the mobile service operators and often they even encounter obstacles to read the text of the contracts before signing them.

This is so as the term of indexation in the contract does not require the customer’s explicit consent unlike terms such as “the contract’s entry into effect”, “consent given for the processing of personal data” about which it may be inferred that the customer has had the opportunity to negotiate.

“In the understanding of the Commission for Consumer Protection (CCP) vis-à-vis the indexation of mobile services in 2023 and drawing on Art. 144, para 4 of the Consumer Protection Act (CPA) “…the clauses of indexation of prices shall not be treated as unequal terms in the sense of Art. 143, para 2, subpara 13 of the Consumer Protection Act (CPA).” That is, the controlling authority under the CPA sees as lawful for the mobile operator to increase the price while the consumer is stripped of the right in such a case to withdraw from the contract if the finally set price is significantly higher compared to the price agreed upon the conclusion of the contract. In connection with this, I want to emphasize that the legal logic is that Art. 144, para 4 CPA should be interpreted in relation to Art. 144, para 3, subpara 1 CPA that excludes the application in Art. 143, para 2, subpara 13 for services whose price is pegged to index adjustments. The provision of Art. 144, para 4 adds that the condition for this is that the clauses are legal and the method of adjustment of the prices is described clearly and in details in the contract,” Prof. Diana Kovacheva wrote.

She reemphasized that the price of mobile services is not pegged to an index and that indexation is provided for as an opportunity and referred to Decision No. 60095/16.08.2021 on Commercial Case No. 663/2020, Commercial Court, II Commercial Division of the Supreme Court of Cassation.

“The main criterion for applicability of the exception as laid down in Art. 144, para 3, subpara 1 CPA is that the price adjustment is to be attributed to outward circumstances that are beyond the businessman’s control…” “It is the outward circumstances that can justify the adjustment of the price (the interest rate), not the personal authority of the businessman and/or of the provider of financial services that are the reason for the lawmaker to provide for the continuation of the contract and its binding effect on the parties to it thereof regardless of the fact that the party aggrieved by the price increase is always the weaker party, the consumer, whose rights are subject to protection.” The indexation of mobile services prices is not to be attributed to outward circumstances but to the mobile operators’ subjective judgment to apply indexation.

“Therefore, the exception was introduced subject to the businessman’s good faith as presumed by the law, i.e. the businessman’s mala fide conduct renders the special deviation from the general definition of inequality inapplicable. Good faith being there is a prerequisite for the field of application of the provision excluding inequality of Art. 144, para 3, subpara 1 CPA, which follows both from the purpose of this piece of legislation and from the systematic interpretation of the provision in relation to Art. 144, para 4 CPA.“

The Ombudsman pointed out that the reference of the Commission for Consumer Protection (CCP) only to Art. 144, para 4 CPA for the purpose to exclude the application of Art. 143, para 2, subpara 13 CPA is wrong.

Diana Kovacheva is firm that the indexation clause in the contract does not allow consumers to assess the economic consequences of a conclusion of a contract. In her understanding, the Commission’s answer is puzzling: “The indexation clause clearly indicates the amount of the possible increase, namely, the average annual index of consumer prices in the previous year as reported by the National Statistical Institute (NSI). The average consumer can assess the economic consequences of a possible conclusion of a contract.”

“The indexation clause does not clearly indicate the amount of the possible increase; it indicates only that it is adjusted to the average annual index of consumer prices in the previous year as reported by the National Statistical Institute (NSI). There is no way for a consumer, even if he/she is an economic expert, to know what the average annual index of consumer prices will be,” the Ombudsman stressed.

She recalled that in 2023 the government provided support to mobile operators by an adjustment of the Fees Tariff of the Communications Regulation Commission under the Electronic Communications Act to reduce the fees and some of the reasons for that were the promotion of investment; boost of innovation; creation of conditions to put in practice a new generation of mobile networks (5G). Further, she emphasized that those were the very same motives given by a representative of the mobile operators as the reason for the increase of prices through indexation. The result is that mobile operators pay lower fees but continue to increase the prices of mobile services by indexation. As we know, each new tariff plan sets higher prices than the previous one.

“The question arises: is the mobile operator honest in the indexation of prices to adjust them to inflation since the economic behavior of the average consumer who is affected or who is the intended target changes or is likely to change significantly. The answer is: no, the option imposed in the contract to change the monthly subscription fee once a year to adjust to the average annual index of consumer prices in the previous year as reported by the NSI does not conform to the requirement of good faith. Such a business practice is unfair (Art. 68 d CPA)” Diana Kovacheva stated firmly.

Further she wrote that in 2023 the Subcommittee on Monitoring Consumer Protection Activities and Restriction of Monopolies of the 48^th National Assembly held two meetings to discuss the decisions of the three mobile operators – Vivacom, Yettel and А1 to index the tariffs of the monthly subscription plans to adjust to the average annual index of consumer prices in 2022 as reported by the NSI. She noted that despite the commitments made at the time to protect the rights of consumers, the indexation of the prices of mobile services is in progress.

Therefore, the Ombudsman insisted that immediate action be taken to end this practice.