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increasing the monthly charge without contract and with complicated formula
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Ken,
We are looking to implement an across the board (all clients) increase in their RMR. The only increase supported in the majority of our agreements is a PPI increase at contract renewal. We recently inserted language in our new customer agreement to support an annual 3% increase. We believe the new agreement supports a general one time price increase, but we question our contractual liability to do so for our clients contracted under the old agreement. Can you comment on our dilemma?
Thank you for any help you can provide. I’m copying our VP Finance to keep him in the loop.
Louis
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Response
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Your dilemma is self inflicted. How much easier it would have been, and will be, if you simply get and use the Standard Form Agreements. We've already tested them.
If your contracts with your subscribers and do not provide for increases then obviously you cannot increase the charges without the subscriber's consent. Your other contracts have a PPI increase? Who thought of that one? For those of you who don't know what a PPI increase is, and I am betting that includes 99% of you [and it included me, I admit], the PPI is:
"The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale, or producer level. A monthly release from the Bureau of Labor Statistics (BLS), the PPI shows trends within the wholesale markets (the PPI was once called the Wholesale Price Index), manufacturing industries and commodities markets. All of the physical goods-producing industries that make up the U.S. economy are included, but imports are not.
The PPI measures the average changes over time in the selling prices received by domestic producers.
The PPI differs from the Consumer Price Index (CPI) in terms of the composition of the goods and services covered, the types of prices collected and the extent of coverage of the services sector.
The PPI measures sales at all levels of output for U.S. producers. This includes sales of non-finished goods used along the chain of production and output. The CPI measures purchases of finished goods and services by urban households." http://www.investopedia.com/university/releases/ppi.asp
So let me give my legal opinion about your choice of PPI for an increase. It's nuts.
You should use the Standard Form Agreements which provide for up to 9% increase per annum, and the subscriber agrees to pay it. Pretty simple. Alarm decides to increase up to 9% and the subscriber is obligated to pay the increase; no right to cancel, no right to refuse, no right to complain.
If anyone can justify using the PPI or even the Consumer Price Index, both of which, by the way, don't come close to 9% and require checking whichever index you have chosen to govern the increase, please let us all know.
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