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Berlin Regional Court: Netflix’s pricing policy not lawful

Netflix’s arbitrary price increases have been a thorn in the side of consumer advocates for quite some time. Now the corresponding clauses in the user contract could be declared invalid.

Pioneering ruling by the LG Berlin

In one of its contract clauses, Netflix grants itself the right to change the prices for a subscription according to its own ideas. This clause is now most likely invalid. The Berlin Regional Court (LG Berlin) has ruled that such clauses are invalid.  The plaintiff was the Federation of German Consumer Organizations (Vzbv). A corresponding written version of the judgment is now available.

Arbitrary pricing

Jana Brockfeld, legal officer at the Federation of German Consumer Organizations (Verbraucherzentrale Bundesverband) made it clear why the clause was opposed. Thus she said:

“Unilateral price changes are only allowed in current contracts if they follow fair and transparent rules”

However, since no real plan can be traced in Netflix’s pricing policy, a unilateral price change is not possible in this case, she said.

Unpredictable costs

A look at Netflix’s terms of use quickly makes it clear, even to laymen, what problem the consumer advocates have with the clause. After all, it can be read out here that prices for streaming subscriptions can be set

“at reasonable discretion”

could change. Furthermore, it is clear from the clause that this is

“from time to time”

could happen. The streaming service also gives a reason for the arbitrary pricing policy. Thus, one argues that price increases are necessary from time to time,

“to reflect the impact of changes in the overall costs associated with our service.”

There is a lack of transparency

True, Netflix talks about said “total costs” being the result of production, marketing and licensing costs, among other things. But that does not at all ensure that customers could clearly understand when and why a price increase comes about. Accordingly, the Berlin Regional Court also criticized the lack of transparency of the clause in its ruling. It is not known, for example, whether a price increase for German subscribers is not also influenced by overall costs that affect U.S.-exclusive productions, for example. In order to be able to understand this more precisely, one must bear in mind that not all Netflix is the same.

There are sometimes serious differences between the range of available series and movies in the various countries. If Netflix carries out a price increase for its subscribers in Germany, it must also be possible to understand how this comes about. Furthermore, according to the ruling, the fairness of the clause is also lacking. After all, if production costs were lower, one would also have to respond with reduced costs. However, there has not yet been a downward price adjustment. At the same time, production costs were certainly at a comparatively low level for Netflix, at least during the peak phase of the corona pandemic.

Not the first complaint from consumer advocates

Incidentally, this is not the first time that Netflix has had trouble with consumer advocates. In the past, for example, an obscure contract clause caused the Vzbv to go to court. This also involved a questionable adjustment mechanism for subscription prices. In 2019, this was also declared inadmissible by the courts. As a result, Netflix unceremoniously deleted it from its terms of use.

This time, the streaming service does not want to simply accept the ruling. Instead, the U.S. company has already announced that it will appeal and take the case to the Berlin Court of Appeals. However, a spokeswoman for the plaintiff consumer advocates was optimistic when speaking to our colleagues at Golem.de:

“Should the ineffectiveness of the price adjustment clause also be confirmed by the next instances and then become legally binding, price increases that have been based on this clause would, in our view, have been made without effective basis”

Simon Lüthje

I am co-founder of this blog and am very interested in everything that has to do with technology, but I also like to play games. I was born in Hamburg, but now I live in Bad Segeberg.

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Netflix’s arbitrary price increases have been a thorn in the side of consumer advocates for quite some time. Now the corresponding clauses in the user contract could be declared invalid. Pioneering ruling by the LG Berlin In one of its contract clauses, Netflix grants itself the right to change the prices for a subscription according … (Weiterlesen...)

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