Saturday, July 21, 2012

KDDI in lawsuit over cancellation fees

KDDI is appealing a Kyoto District Court ruling that it must return a portion of cancellation fees paid by customers who ended service within the last two months of their contract. The court determined that the damage to KDDI from breach of contract equates to ¥4,000 per month. Therefore, the ¥9,975 cancellation fee levied by KDDI was overcharging, since that amount was greater than the damage incurred.

Here's where things get a little strange.

Instead of ordering KDDI to return the approximate ¥2,000 that it would have overcharged someone canceling during the 22nd month of their contract, the judge is requiring KDDI to return ¥7,950, leaving KDDI with only 20% of the original cancelation fee.

Effectively, this extends the period during which a contract can be terminated from one month every two years, to three months every two years. This doesn't address the automatic renewal of contracts, however, which is the real problem.

In japan, the reason for a 2-year contract is ostensibly for the discount on the service plan, unlike the US where it is typically to cover the handset subsidy. This gives Japanese carriers more leverage to argue in court and to government regulators that auto-renewing contracts are justified and necessary, since the carrier is reducing the base service fee by half.

Of course what's really happening is that the carriers are inflating the "full" price.

The lawsuit was brought by the non-profit Kyoto Consume Contract Network(京都消費者契約ネットワーク)who has also brought similar suits against NTT Docomo and Softbank Mobile.

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