The competition watchdog has proposed radical reforms to how certain markets operate after finding consumers are wasting £4 billion a year because of their loyalty.
The Competition and Markets Authority (CMA) investigated concerns that companies penalise existing customers by charging them higher prices than new customers, following a "super complaint" by Citizens Advice.
Which markets are accused of exploiting customers?
The watchdog looked at five markets highlighted by the super-complaint:
Mobile phone contracts
It also said the loyalty penalty is likely to be a "much wider issue" than just these five markets.
What is the loyalty penalty and who's paying it?
Longstanding customers who stick with their existing provider year in, year out are being charged higher prices than new customers being wooed by firms.
Many services are paid for through automatically renewed or rolled over contracts.
This can be convenient, but it can also increase the risk of a loyalty penalty.
Some people paying the loyalty penalty may not realise they could be better off elsewhere and may believe staying put will pay off in the long term.
It also found vulnerable people, including the elderly and those on a low income, may be more at risk of paying the loyalty penalty.
What have the CMA found?
The CMA's probe uncovered "damaging practices" by firms, including continual year-on-year stealth price rises; costly exit fees; time-consuming and difficult processes to cancel contracts or switch to new providers; and requiring customers to auto-renew or not giving them sufficient warning their contract would be rolled over.
The CMA found millions of people are affected, including around 1 million in the mortgage market to nearly 12 million in insurance.
The CMA is recommending government and regulators crack down on harmful business practices using enforcement powers, stating clearly the principles businesses should follow and holding firms publicly to account for their actions.
Most radically, it also suggests "targeted price caps" should be put in place to protect the people worst hit.
The CMA recommended Ofcom puts regulation in place to stop mobile providers charging pay-monthly customers the same rate once they’ve effectively paid off their handsets at the end of the minimum contract period.
What should consumers do in the meantime?
Consumer campaigners said people wondering if they could be better off with another firm should not wait for the problems found by the watchdog to be fixed.
Jenni Allen, managing director of Which? Money, said: "While we await the necessary action we would urge consumers unhappy with their current provider to consider switching to a better deal - a few minutes of your time could potentially save you hundreds of pounds a year."
Consumers who want to stick with their provider could try haggling with them to see if they can get the price down.
Doing some research before trying to haggle could help, as consumers may be able to give their provider examples of cheaper deals they have seen elsewhere - and ask them to match or beat the price.
What have experts said?
It was recommended that the Financial Conduct Authority "look closely" at evidence that insurance firms continually raise prices and take action to prevent people being exploited. This should include considering "pricing interventions".
Andrea Coscelli, chief executive of the CMA, said: "Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated.
"They shouldn’t have to be constantly 'on guard', spending hours searching for or negotiating a good deal, to avoid being trapped into bad value contracts or falling victim to stealth price rises."
Gillian Guy, chief executive of Citizens Advice, said: "This is a strong response from the CMA, recognising that loyal customers are getting ripped off.
"That is exactly why we’ve been fighting to stop the loyalty penalty, and why we made the super complaint."