Not content with introducing new compulsory constraints on mobile mis-selling after losing patience with an industry voluntary code, Ofcom is also now consulting on tighter controls over fixed line sales practices. Anna Montes reads the depressing telecoms runes.
When: 16 September 2009
Where: United Kingdom
Law stated as at: 29 September 2009
For some time now, Ofcom has received concerning levels of complaints about general mis-selling in the fixed-line and mobile phone sectors. Such mis-selling can take various shapes and forms and can include "slamming" (the practice of switching a consumer from one provider to another without their knowledge); communications providers ("CPs") passing themselves off as other companies and not providing important contractual information to consumers; and CPs making it difficult for consumers to transfer to a different supplier if they want to. Ofcom has previously warned the sector it will take appropriate actions if necessary and it has felt that the time has come to consider its options.
Where are telecom service providers going wrong?
By way of background information, all providers of electronic communications networks or electronic communications services are authorised to provide networks or services in the United Kingdom providing that they comply with the "General Conditions of Entitlement (General Conditions)" which Ofcom has the power to enforce under the provisions of the Communications Act 2003.
In 2005, Ofcom introduced new rules relating to fixed line telecom services to protect consumers, which required all CPs to establish sales and marketing codes of practice which needed to be consistent with Ofcom guidelines. Where mobile telecom services are concerned, as we reported on www.marketinglaw.co.uk back in 2007, the mobile network operators (MNOs) introduced a voluntary Code of Practice to tackle mis-selling and cashback issues due to the volume of complaints that they would receive from consumers regarding such matters. However, despite the MNOs best attempts, the introduction of this Code of Practice did not lead to a significant reduction in complaints, so Ofcom proposed a new General Condition, GC23, in 2008 to apply to all mobile service providers.
Ofcom has clearly tried to do something about the levels of consumer complaints and alleged mis-selling in the mobile and fixed-line sectors yet the complaints regarding mobile mis-selling just keep coming in.
Ofcom's latest consultation
Fixed line services
Ofcom has published a consultation detailing a number of proposals for fixed-line selling and these aim to address what Ofcom believes to be the main issues within the sector, namely confusion from CPs as to what is expected of them; codes of practice not being the most effective method to secure compliance and to enable enforcement activities; customers switching service providers without realising they have existing contractual liabilities with their original CP (which can often include early termination charges); and there being misuse of the "cancel other" process used within the sector. This is the process which binds only BT at present and which stops the transfer of a consumer from one CP to another taking place when the customer alleges slamming, but Ofcom feels it is sometimes used to prevent customers switching CPs when they want to.
To address these issues, Ofcom's proposals are as follows:
(a) to clarify the regulations by explicitly banning misselling under the General Conditions;
(b) to simplify the regulations by moving away from having codes of practice and introducing a prohibition of inappropriate sales and marketing activities;
(c) requiring CPs to alert consumers at the point of sale and in letters that they may have existing contractual liabilities with their current CP to ensure that consumers have access to better information on the potential consequences of switching;
(d) extending the "cancel other" rules to cover all fixed-line CPs and not just BT; and
(e) to clarify existing general record-keeping requirements, and to require CPs to make, and retain, voice recordings of all telephone conversations relating to sales.
Under the new rules contained in GC23 CPs must:
(a) not engage in dishonest, misleading or deceptive conduct and must put provisions in place to ensure that those selling their products and services similarly do not mis-sell;
(b) make sure the customer intends and is authorised to enter into a contract;
(c) ensure consumers get the information they need at the point of sale before entering into a sales agreement;
(d) ensure that the terms and conditions of cashback deals offered by their retailers are not unduly restrictive; and
(e) conduct due-diligence checks in respect of their retailers.
GC23 came into force on 16 September 2009, and to ensure CPs comply with the requirements of the new rules, Ofcom has launched a new monitoring and enforcement programme. Ofcom has made it clear that it intends to monitor trends and examine complaints received by the Ofcoms Advisory Team and Consumer Direct. Where there is evidence of potential non-compliance, Ofcom will take appropriate action which could include separate investigations of named CPs which will be announced via Ofcoms Competition and Consumer Enforcement Bulletin and potential fines.
Why this matters:
Communications Providers and their advertising agencies must note the new obligations they need to comply with, particularly as Ofcom shall be monitoring complaince. Sales and marketing practices need to be reviewed and amended where necessary to protect consumers from potential mis-selling of telephony services.
CPs should not forget that although Ofcom is seeking to simplify applicable rules by bringing them under the General Conditions, the General Conditions are not a one-stop shop for all applicable regulations where misleading information and sales and marketing practices are concerned. Advertisers must also always consider the application of the Consumer Protection from Unfair Trading Regulations 2008 where their commercial practices are concerned and where advertising materials are concerned then the CAP Code also needs to be followed.