May 27, 2016

UK watchdog lays down the law to cloud storage providers

Cloud storage users to benefit after action by the Competition and Markets Authority (CMA).

The Competition & Markets Authority (CMA), the UK’s anti-competition watchdog, following a review of the cloud storage industry came down on providers who used contracts that allowed them to increase prices and terminate service without notice.

Following the review, 3 providers – Dixons Carphone plc, JustCloud and Livedrive – have committed to providing fairer terms for their cloud storage customers. The CMA announced that it was working with several other unnamed companies to make their terms and practices fairer and warned companies that do not comply with consumer law that they risk enforcement action.

The CMA in its findings said that around 3 in 10 British adults use cloud storage in a personal capacity. The majority currently benefit from free services that come with their devices such as smartphones and tablets and consumers are generally satisfied with their services.

However, it also heard some concerns and found that businesses have some contract terms and practices which could be in breach of consumer law, including those giving companies the ability to:

  • change the service or terms of the contract at
  • any time, for any reason and without notice
  • suspend or terminate the contract without notice for any reason
  • automatically renew a contract at the end of a fixed term without giving notice or withdrawal rights

In addition to its report, the CMA also published an open letter for businesses, which advised them to:

  • review their terms to make sure they are fair for consumers
  • ensure that consumers get necessary information before they buy

Nisha Arora, CMA Senior Director, Consumer, said:

Cloud storage offers a convenient means of keeping family photos, favourite music and films and important documents safe, and accessing them quickly from any device.

Our review found that people find these services really valuable. However, we also heard some complaints resulting from unfair terms in contracts. If left unchanged, these terms could result in people losing access to their treasured possessions or facing unexpected charges.

In this rapidly-developing market, it’s important that we act now to ensure that businesses comply with the law and that consumers’ trust in these valuable services is maintained. We welcome the fact that a number of companies have already agreed to change their terms, and expect to see improvements from other companies.

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