Straight out confront them. Tell them you will take your business elsewhere if they continue, and you will do everything in your power to get the word out to their other resellers about what they are doing. I don't know if that would work or not, but either way, I would take NetNerds Advice and find a different provider to sell for.
Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity.
I probably will end up dumping them, but I'm only 1/4 way through a 1 year contract I signed on for.
I only have about 30 customers, but it'd still be a pain to switch them all. I think I'll slowely move them over time and then cancel my reseller account next year when it's up.
My only fear with confronting them is that weird things will start happening to my sites when I piss them off. Granted that wouldn't be very professional on their part, but after this, I don't trust them at all.
they're pretty cheap so "you get what you pay for" comes to mind...
There's nothing in any agreement I have about them doing this sort of thing either. I will end up switching over time so when my year comes up, I'll have all my customers migrated off and THEN I'll send them the nasty message otherwise I fear they will do something more drastic and my sites will all of a sudden stop working altogether.
They also recently did a PHP update and gave me 4 days notice saying "we're upgrading to xxxx so make sure all your apps will still work." The language was a lot more professional than that, but 4 DAYS to make sure every PHP app all my customers use is pretty ridiculous.
You appear to be binded by the contract. If you are not too tight for cash, I would move all your sites over to another reseller, like serverme.com (which I use and they are very cheap and NOT nasty), and then don't continue to use them next year. It is difficult to clarify when you first go to a company that they aren't dodgy: you should get recommendations to prevent this sort of thing happenening.