News

28 March 2023

Ombudsman Diana Kovacheva has sent yet another letter to Caretaker Minister of Economy and Industry Nikola Stoyanov and to Commission for the Protection of Competition (CPC) Chair Stoil Alipiev in relation to the indexation of the monthly fees for mobile services. As is already known, all three mobile operators have increased their monthly tariffs by 15.3% which, according to the Ombudsman, is completely unacceptable.

Prof. Kovacheva sounds the alarm that the customers of mobile operators are not protected by the control authority as per the Consumer Protection Act (CPA) and recommends that the CPC should reconsider its opinion that there are no unfair terms and unfair trade practices of the mobile operators.

The Ombudsman recalls that, at a meeting with the Minister of Economy and Industry, she received assurances that the materials in the case would be analysed carefully and a meeting would be held with the institutions; however, such a meeting has not been held so far.

In her letter, Diana Kovacheva adduces arguments as to why she disagrees with the CPC response that there are no unfair terms pursuant to Article 143, paragraph 2, items 10, 13 and 19.

The Ombudsman emphasises that, according to Article 3 (2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, “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. Where any seller or supplier claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on him.”

Prof. Kovacheva adds that consumers are not only unable to influence the substance of their contracts with mobile operators, but there are also cases in which they are not even able to familiarize themselves with their content. She emphasises that the institution continues to receive complaints from citizens who have not been given the opportunity to become familiar with the content of a contract before signing it on an electronic display.

“I emphasise once again that the indexation clause does not require express consent unlike other clauses such as “entry into force of a contract” and “consent for the processing of personal data” with respect to which we can undoubtedly come to the conclusion that the consumer has had the opportunity to negotiate them,” the Ombudsman states.

Prof. Kovacheva notes that, according to the CPC, pursuant to Article 144, paragraph 4 CPA, “… it is not possible to consider the indexation clauses unfair within the meaning of Article 143, paragraph 2, item 13 CPA”. In other words, the mobile operator may increase the price in these cases without the consumer having the right to reject the contract if the final price set is significantly higher than the price negotiated upon the conclusion of the contract because the indexation clauses are compliant and the manner of changing the prices is described in detail and clearly in the contract.

“In this regard, I would like to emphasise that the legal logic is for Article 144, paragraph 4 CPA to be interpreted in conjunction with Article 144, paragraph 3, item 1 CPA which makes Article 143, paragraph 2, item 13 inapplicable also for services whose price is tied to the changes in an index. The provision of Article 144, paragraph 4 adds that the condition for this is for the price indexation clauses to be compliant and the manner of changing the prices to be described in detail and clearly in the contract,” the Public Advocate writes.

Diana Kovacheva is certain that the price of mobile services is not tied to an index because indexation is envisages only as a possibility.

She also refers to a section of the motivation for Judgment No. 60095 of 16 August 2021 in commercial case No. 663/2020, Commercial College, Commercial Division II of the Supreme Court of Cassation: “The main criterion for applicability of the exception under Article 144, paragraph 3, item CPA is for the change in the price to be premised on external reasons which are independent of the trader… It is the external reasons capable of determining the change in the price (interest) and not the subjective power of the trader and/or the supplier of financial services which make up the grounds for the legislator to allow the transaction to be preserved together with the link between the parties thereto, regardless of the fact that the party suffering the damage in the event of an increase in the price is always the weaker one – the consumer whose rights are subject to protection” – the indexation of the prices of mobile services is not due to external reasons but to the subjective assessment of the mobile operators to apply an indexation.

“Therefore, the exception is introduced as the law assumes that the trader acts in good faith, i.e. any behaviour not in good faith entails the inapplicability of the special deviation from the general definition of unfairness. The existence of good faith is a prerequisite for the application scope of the norm of Article 144, paragraph 3, item 1 CPA which excludes unfairness, which is entailed both by the purpose of the law and by the systematic interpretation of the provision in conjunction with Article 144, paragraph 4 CPA…”

“Therefore, the reference the CPC makes solely to Article 144, paragraph 4 CPA in order to exclude the application of Article 143, paragraph 2, item 13 CPA is wrong,” Diana Kovacheva is definitive.

She also highlights that the indexation clause does not make it possible for consumers to assess the economic consequences of entering into the contract.

Prof. Kovacheva disagrees with the CPC opinion that “The indexation clause indicates clearly the amount of a possible increase, namely the average annual consumer price index for the previous year as announced by the National Statistical Institute. The average consumer is able to assess the economic consequences of a possible conclusion of a contract.”

In her opinion, the indexation clause does not indicate clearly the amount of a possible increase but only that it is changed based on the average annual consumer price index for the previous year as announced by the National Statistical Institute. For example, for 2022 it is 15.3% announced in the middle of January 2023; for 2021 – 3.3%; for 2020 – 1.7%.

“There is no way for the consumer, even for an economic expert, to know what the average annual consumer price index will be,” Prof. Kovacheva is definitive.

In conclusion, she considers that the indexation envisaged in the General Terms and conditions of mobile operators as a possibility is an unfair term which entails unfair trade practices by mobile operators.

Her argument is that, pursuant to Article 68 CPA, a trade practice from a trader to a consumer is unfair if it is contrary to the requirement for good faith and professional competence and if it changes or if it is capable of changing substantially the economic behaviour of the average consumer affected or targeted by it.

Furthermore, if it does not meet the requirement for good faith, any possibility for a change in the monthly subscription fee once a year negotiated non-individually, through indexation based on the average annual consumer price index announced by the National Statistical Institute for the previous year.