Netflix and Spotify Price Hike Clauses Declared Unlawful
Netflix and Spotify's price hikes have ruffled many feathers due to the lack of prior consumer consent, a practice the Berlin Regional Court recently deemed unjust. In two separate judgments against both streaming services, the court ruled that their unilateral increases were in violation of fair and transparent business rules (Ref.: 52 O 157/21 and 23 U 112/22). The Berlin Court of Appeal reinforced these rulings, declaring the corresponding price increase clauses invalid (Ref.: 23U 15/22 and 52 O 157/21, Ref.: 23 U 112/22 and 52 O 296/21).
Customers' consent is essential for Netflix and Spotify to alter their prices, according to the court. The companies could have easily obtained customer approval for a price increase.
What happens next?
Netflix reserves the right to change subscription prices "from time to time" and "at its reasonable discretion" based on changes in overall costs related to the service. Meanwhile, Spotify's Terms of Service allow for subscription fee and other price increases to "offset the increased total cost." The total cost includes factors like production and license costs, personnel, administration, and financing costs, taxes, fees, and other charges. These clauses, however, fail to provide for price reductions based on lower costs.
The court's rulings have not yet received final legal recognition, as an appeal to the Federal Court of Justice is still possible. Consumers may need to actively seek refunds of overpaid fees, as Netflix and Spotify do not currently offer refunds, although refunds will only be available once the judgment is final. These companies are also entitled to cancel subscriptions for old prices at that point. Customers can only subscribe again at the current rates.
Considerations for consumers
If subscribed to Netflix or Spotify, consumers should consult their local consumer centers to gather insights into the recent legal rulings. Consumers should be mindful when signing mobile phone tariffs, as some providers may attempt to include provisions for unexpected price hikes. Stiftung Warentest recommends using trusted consumer protection apps to monitor mobile phone tariffs and ensure providers comply with legal guidelines regarding price hikes.
Legal experts advise consumers to review their contracts with Netflix and Spotify in light of the recent rulings, looking for any existing price hike clauses and weighing the options for challenging their validity.
Insights from consumer protection enrichment data
German consumer protection laws are particularly stringent. Courts evaluate clauses suspected of being unfair or misleading, as demonstrated by the Hamburg Regional Court's judgment against Viagogo. Price increase clauses in Netflix and Spotify must adhere to transparency, reasonableness, acceptable notice periods, and respect consumer rights under German law. Failure to do so may result in legal challenges, refund requests, and possibly contract termination without penalty.
