Orange is hiking its pay monthly price plans by 4.34%. And not just for new customers – existing customers will get hit too. It doesn’t stop there – Orange won’t let you cancel your contract. Is that fair – or legal?

This morning we were alerted to Orange’s price rise announcement by an email from Aaron. He had been sent a brief text from the mobile phone network, but couldn’t quite believe it was allowed to put prices up for existing customers:

‘I do not believe that it is fair of a corporation to change the price of a contract that I signed up to, as my phone bill was essentially “fixed” every month.’

Why can’t you cancel your contract?

Orange blames the rise on inflation hitting a 20-year high, adding that this is ‘having a significant impact on business and households alike’. But Orange won’t have to suffer, instead it will simply pass the cost onto its customers:

‘Unfortunately, we’ve had to re-evaluate our prices for the first time and are sorry to say that there will be a 4.34% increase in our monthly plan prices from 8 January 2012. This is lower than the Retail Price Index (RPI) measure of inflation, which currently stands at 5.4%.’

So if you’re on a monthly price plan with Orange (and signed up to your current contract before 1 September) watch your bills go up by more than 4% next year.

The real kick comes from Orange saying you won’t be able to cancel, as Kimberly Harwood (@kimberlyharwood) told us on Twitter:

‘Can’t cancel my contract as the rise is ‘within their terms and conditions’ disgraceful! Won’t be renewing.’

Ultimately, you’re locked in. In section 4.3 of the contract, Orange states that although you’re able to terminate if it makes certain changes to the terms of your contract, you’ll be unable to do so if it puts prices up at a rate lower than the RPI measure of inflation.

Is Orange playing by the letter of the law?

I’m getting deja-vu from the T-Mobile saga, where that mobile network slashed the data allowance for its existing customers. How can it be right that a company can change the payment terms of your contract when you’re already signed up?

Is Orange behaving legally? It seems that it probably is. Our lawyer Peter McCarthy told us that Orange’s T&Cs would stand unless it could be successfully challenged as ‘unfair’.

The Unfair Terms in Consumer Contracts Regulations 1999 says a clause is likely to be unfair if it allows ‘a seller […] to increase their price without […] giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded’.

Ultimately, the success of any such challenge against Orange would depend on whether the increase was considered to be significant or not.

Ofcom cites material detriment

We also got in touch with the regulator Ofcom, to see whether you should have the right to terminate your contract with Orange. It told us that customers will only be able to cancel if the changes are likely to be of ‘material detriment’ (as per Section 9.6 of the Communications Act 2003) which in this particular case, Ofcom was unable to verify.

However, you do have the right ‘to challenge the matter through the provider’s complaint process and, failing that, via Alternative Dispute Resolution.’

Nevertheless, even if Orange is playing by the book, is it being fair to its existing customers? Should companies be able to change prices mid-way through your contract, even if it has allowed itself to do so in the small print? And finally, will you stick with Orange when your contract comes up for renewal? Somehow I doubt it.