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Ofcom’s Investigations Programme

Introduction

1.1 This report provides a detailed analysis of the work of Ofcom’s Investigations Programme during the period between 1 October 2006 and 31 March 2007 and compares this activity with that for the preceding period between 1 April and 30 September 2006. Unless stated, it reflects the position as at 31 March 2007.

Main points

1.2 The main points arising in comparing activity during this period and the preceding six months are:

Ofcom received 105[^(-1-)] complaints and disputes (down from 129[^(-2-)]);
Ofcom opened ten investigations (compared to twelve);
Ofcom accepted four disputes for resolution (up from two);
Ofcom opened five investigations on Ofcom’s own-initiative (compared to six); and
Overall, a similar level of formal enforcement action was taken.

The report also provides details of Ofcom’s performance against its stated targets for handling enquiries and completing investigations into complaints and resolution of disputes. Results are:

none of the enquiries considered during the period exceeded the 15 working day target without specific defined reasons and agreement by the Director of Investigations; and
none of the investigations opened during the reporting period had exceeded targets as at 31 March 2007. Also, 92% of all of the investigations opened by Ofcom since it assumed its powers in December 2003, that had been closed by 31 March 2007, were completed on time.

1.4 David Stewart was appointed Director of Investigations in April 2005 and has directed the programme for the period of this report.

Background

1.5 Ofcom has a number of roles and duties relating to identifying and responding to conduct which is unlawful or which is anti-competitive, and in resolving disputes. Responding to complaints or disputes filed by market participants - or in some instances by consumers - the Investigations Programme ensures that Ofcom responds quickly, firmly and effectively to breaches of regulatory rules or relevant law and is able to act effectively in resolving disputes.

1.6 As a sectoral regulator, under the Communications Act, Ofcom has responsibilities to enforce ex ante rules (for example, rules imposed on providers with significant market power, and rules imposed on all providers as general conditions) and to determine disputes between providers of electronic communications networks and services. Ofcom also has responsibilities under the Broadcasting Acts to enforce ex ante powers.

1.7 As a national competition authority, Ofcom is empowered to enforce competition law concurrently with the Office of Fair Trading (OFT) and acts as the competition enforcement authority for the communications sector. Ofcom’s role under competition law includes:

enforcing the Chapter I and Chapter II prohibitions of the Competition Act 1998;
enforcing Articles 81 and 82 of the EC Treaty; and
investigating markets and making references under the Enterprise Act 2002.

1.8 Ofcom also has a role to enforce consumer protection law for the communications sector. Whilst the primary role for handling individual consumer complaints rests with the Ofcom Contact Centre, Ofcom’s Investigations Programme conducts investigations under:

The Unfair Terms in Consumer Contracts Regulations 1999;
Part 8 of the Enterprise Act 2002; and
The Communications Act 2003.

1.9 In July 2004 Ofcom published Guidelines setting out its approach when investigating competition complaints and resolving disputes between companies in the communications sector. The Guidelines provide companies with a clear, easy to follow tool-kit explaining how both small and large companies should prepare the evidence required before Ofcom will take forward a formal investigation.

1.10 In July 2006 Ofcom issued revised Enforcement Guidelines for consultation.[^(-3-)] The revised guidelines reflect the outcome of Ofcom’s internal review of its investigations function and Ofcom’s growing body of practice and established decisions in this area, as well as the developing jurisprudence of the Competition Appeals Tribunal. The revised guidelines set out a number of changes to Ofcom’s existing processes for the handling of competition complaints, and complaints and disputes concerning regulatory rules, including the following:

More information about Ofcom’s approach to consumer protection;
Greater clarity about the handling of investigations, including the factors that Ofcom will consider in deciding whether to conduct an investigation;
Changes to Ofcom’s timing for the handling of competition law investigations; and
Information about Ofcom’s approach to enforcing BT’s Undertakings.

1.11 Ofcom’s approach continues to seek to reduce the costs to industry of Ofcom’s work and to focus scarce resources to deliver the best outcomes for citizens and consumers. Unsubstantiated complaints, or those which could be better resolved elsewhere, are dealt with quickly at an early stage. This allows Ofcom to focus on the most serious allegations inhibiting fair and effective competition in the sector, or in relation to the most serious cases of harm to consumers.

1.12 Ofcom has considered stakeholders’ comments on the draft revised guidelines and expects to finalise them in the early part of 2007/08.

1.13 Ofcom has published five previous six-monthly reports, setting out in detail the work of the Investigations Programme. This, the sixth report, covers the period between 1 October 2006 and 31 March 2007 and compares the level of activity with that during the preceding six months.

Highlights

Consumer enforcement

1.14 Consumer enforcement continues to be a high priority for Ofcom. Continuing to build its expertise in this area, Ofcom recently recruited Lynn Parker (formerly Deputy Director of Consumer Enforcement at the Office of Fair Trading) as a Principal Investigator to direct this area of Ofcom’s work. In addition, Ofcom continues to invest time and resources into building a strong and sustainable programme of effective action to enforce consumer law and protect consumers in markets we regulate from scams and unfair practices.

1.15 During the reporting period, Ofcom has continued to pursue a programme of activity to tackle industry-wide practices or failure of compliance. Examples include:

Imposing penalties on five companies totalling £162,500 under section 130 of the Communications Act 2003 for persistent misuse of electronic networks and services.
The issue of a s94 notification of contravention to XLN Telecom in relation to Sales and Marketing activity.
The issue of a s94 notification of contravention to Mercury Telecommunication in relation to non-compliance with Alternative Dispute Resolution requirements.
The issue of a s94 notification to Switch Call in relation to misuse of 070 numbers.
The issue of a s94 notification of contravention to Unicom about conduct relating to the transfer of customers between communications providers.
The securing of a criminal conviction against a director of a company in relation to the provision of false information.

1.16 In addition Ofcom opened a number of new investigations to protect consumers from detrimental conduct as follows:

A complaint from BT Retail about Wholesale Line Rental orders placed by Scottish and Southern Energy (SSE) in which Ofcom concluded that SSE had failed to obtain express positive consent from all its customers before placing transer orders, contravening the requirements of the sales and marketing Code of Practice that SSE is required to establish and comply with under General Condition 14.5.

Ofcom own initiative investigations into The Post Office and Universal Utilities (trading as Unicom) in which Ofcom is considering whether each company has failed to comply with the requirements of its Code of Practice for Sales and Marketing activity.

An Ofcom own initiative investigation into the possible misuse of 087 numbers in which Ofcom is investigating possible scams on the 087 number range, including scams involving:

messages left on consumers’ phones, urging them to call an 087 number to collect a parcel, message or prize which is waiting for them. Consumers advise that upon calling the number, they receive a recorded message which they are charged for until they hang up or are cut off. Several different organisations and 087 numbers have been mentioned by consumers.
rogue advertising of 087 numbers as contact numbers for public service organisations, without the knowledge or approval of the organisation affected. Using the 087 number, calls are still routed to the advertised destination, but a share of the revenue is generated for the rogue advertiser of the 087 number. This is of particular concern to organisations which have identified rogue 087 numbers being wrongly conveyed as legitimate contact numbers, when in fact they have nothing to do with the organisation concerned.

An Ofcom own initiative enforcement programme to give effect to General Condition 22 (service migrations) in which Ofcom is monitoring compliance by broadband providers with new rules introduced on 14 February 2007 governing the obligations of broadband providers to customers who are seeking to migrate between DSL-based broadband services.

Competition enforcement

1.17 No Competition Act investigations were opened or closed during the reporting period. Three cases were ongoing:

1.18 All of these cases have raised a range of difficult and complex issues. Although outside of the reporting period, the first of these was closed in May 2007 and the other two remain ongoing.