The Malta Communications Authority has issued restrictions on mobile and internet providers as it warned users could face "unpredictable" price hikes midway through their contracts.

From January, mobile and internet providers will only be allowed to include a so-called 'price indexation clause' for new contracts that are limited to six months.

And those with existing contracts that already include the clause will be able to terminate them without paying a fee if prices are increased after six months of signing up.

In a statement the MCA said it had "serious concerns" about the practice that allows telecom companies to increase bills based on measures of inflation such as the consumer price index. The clause also restricts consumers from ending contracts without paying an early termination fee.

It said the clause meant uncertainty about total costs through the contract period and hindered consumers from being able to compare price plans "distorting effective competition in the market". 

The MCA said it had decided to step in with new requirements for providers of internet, TV, mobile, and fixed telephony services after "careful consideration of stakeholder feedback".

How does the decision impact new contracts?

• Maximum contract duration of contracts with 'price indexation clauses' will be limited to six (6) months, from January 8;
• Providers may offer plans with a commitment period of up to 24 months, if they exclude 'price indexation clauses';
• Providers must obtain explicit consent from consumers before concluding contracts with 'price indexation clauses,' from March 8;
• Enhanced transparency obligations for contracts and websites publicising plans with price indexation clauses, effective from March 8, 2024.

How does the decision impact current contracts?

• After six (6) months from the contract signing date, consumers have the right to terminate contracts without incurring early termination fees if providers implement price changes based on the indexation clause.

Why aren't the price clauses banned?

The decision comes after the Court of Justice of the European Union determined that consumers do not have the right to withdraw from their contract without early termination fees when price hike clauses are included.

In its statement, the MCA appealed to providers to offer consumers the option to rescind contracts without penalties in case of price revisions due to indexation clauses, made within the first six months of the contract

"The Authority considers that such a voluntary undertaking by providers would be consistent with the objective of ensuring fair and transparent contractual practices in the sector," it said.

The MCA issued the decision after a public consultation in August, which included submissions from the Consumer Association Malta, Consumer Affairs Council, Office for Consumer Affairs within the Malta Competition and Consumer Affairs Authority, EPIC Communications Limited, GO plc and Melita Ltd.

Its decision also covers end-users that are microenterprises, small enterprises, or not-for-profit organisations unless such end-users have explicitly agreed to waive all or parts of those provisions.