The child is now in the fifth grade, the cell phone for this event was given by the generous aunt. Now the only thing missing is the SIM card for the mandatory class chat. So on a busy Saturday you go to an even busier shopping center and then to the shop of a mobile phone provider. They actually want to buy a cheap prepaid card there. However, mother and child come out with a green ballpoint pen – and a 24-month contract. There was little argumentation to oppose the psychologically trained salesperson. After all, the child should be able to reach their parents at any time, even if they have used up their credit with too much daddling on the school bus.

If Federal Justice Minister Christine Lambrecht (SPD) has its way, these long two-year contracts should no longer be possible in the future. In January she had presented the “Law for Fair Consumer Contracts”. It wants to stipulate that energy suppliers, fitness studios and telecommunications companies are only allowed to conclude new contracts with customers with a maximum term of twelve months. An automatic extension should only be allowed for three months, the notice period should only be one month. “Consumers are too often ripped off and taken advantage of,” said Lambrecht at the time.

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The Justice Minister’s statements were a good ten months ago, but the law still does not exist. On request, your ministry announced that the “internal deliberations are still ongoing”. In addition, there are also external consultations: The Ministry of Economics, led by Peter Altmaier (CDU), wants to stipulate in the planned revision of the Telecommunications Act (TKG) that mobile phone contracts may continue to run for 24 months.

So it is still unclear whether and with what content the “law for fair consumer contracts” will come, whether it will be passed in this legislative period.

Only six months left?

Michaela Schröder, Head of the Legal and Trade Team of the Federation of German Consumer Organizations, the demands of the Ministry of Justice do not go far enough. The consumer advocate wants mobile phone contracts to be limited to six months. “Many consumers no longer want to commit themselves that long. They want to be flexible in these contracts.” There are now more and more users who are switching to prepaid contracts.

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In the opinion of the consumer advocate, shorter contract periods lead to more flexibility and thus more competition. As a result, prices are falling, there is a greater variety, Schröder is certain. In the current situation, in which, for example, one works more mobile for a while, one needs another cell phone contract more quickly. The long terms do not adapt to the respective life situation, says Schröder, for example when you go on parental leave.

In some European countries such as Denmark and Belgium, there are already short contract periods – regulated by law. This has led to more competition and lower prices. “Of course the prices don’t go down forever,” says Schröder. “But there is just more variety on the market again.”

In the telecommunications sector, providers must already offer their customers a contract for twelve months. However, this is often very hidden and consumers would not know that the option exists. “The contracts are usually advertised for more than 24 months,” said Schröder.

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Often bad offers

The consumer advocate also complains that customers who are stuck in long contracts often do not get good offers. Only new customers are advertised. That is why there is an urgent need for more competition, and that is primarily possible with shorter terms

Nick Kriegeskotte, Head of Infrastructure and Regulation at the industry association Bitkom – many telecommunications companies are members of this association – believes the contract periods of a maximum of one year are wrong and senseless. “There is already the legal basis that providers must have offers that have the duration.” In addition, with the prepaid offers, there is a large selection of contract design options for consumers. The telecommunications market has also been very strictly regulated in recent years, more so than other areas. In addition, there is a high level of protection for consumers: “Notice periods must be printed on the monthly statement.” In addition, consumers would have to deal more often with the contract design for shorter contracts. “Two years is a manageable period,” says Kriegeskotte.

For Kriegeskotte, this law would only bring disadvantages for customers, contracts would become more expensive: “Smartphones are often more expensive and are refinanced over 24 months. With twelve months that would simply cause higher costs.”

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In fact, more expensive cell phones are being sold over the counter in Germany, significantly more than in other European countries. A study by analysts at Canalys showed that at the end of 2019, twice as many people in Germany bought an iPhone as in Italy. In Spain, more Xiaomi phones were sold than Apple during the same period. The reason for this is that access to high-end models is very easy in Germany. “You will be paid off for two years via the monthly basic fee,” says Jens-Uwe Theumer, Vice President Telecommunications at the Verivox tariff comparison portal.

“End subsidy practice”

High-priced smartphones now only differ marginally, the sharper display or the better processor are usually not the main cost factor. For Theumer, the marketing budget is primarily responsible for the high prices – and the customers finance this through the long contract periods. This distorts competition and leads to Apple, Samsung and, to a lesser extent, Huawei dominating in Germany. Smaller and cheaper brands with equally good cell phones can hardly find their way to the customer.

For Theumer, the law for fair consumer contracts offers a solution for this inflexible and for the consumer expensive market. “If contracts no longer run for 24 months, the subsidy practice in its current form will be terminated.” However, the smartphone would then no longer be the expensive status symbol that it still is for many customers.

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And what happened to the long mobile phone contract for your own child? After a month of school, the son has hardly used his cell phone and has never called his parents. But he still has 23 months to test this function.

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