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Ofcom introduction

Ofcom has a duty to further the interests of citizens and consumers through a regulatory regime which, where appropriate, encourages competition. Effective competition delivers choice and lower prices to consumers as well as opportunities for new services and Communications Providers (‘Providers’). However, consumers may need protection from inappropriate and unacceptable behaviour by certain Providers that may undermine confidence in the market as well as causing individual harm.

An example of such unacceptable behaviour concerns the mis-selling of telecommunications services. The term ‘mis-selling’ covers a range of sales and marketing activities, and includes ‘slamming ’, which is where customers are simply switched from one company to another without their knowledge and consent.

In response to growing levels of complaint volumes about mis-selling and slamming, Ofcom introduced new measures in 2005 to improve the effectiveness of safeguards to protect consumers. The modification to General Condition 14 on Codes of Practice and Dispute Resolution (specifically General Condition 14.5 (‘GC 14.5^(-1-)’) took effect on 26 May 2005. Ofcom’s Explanatory Statement and Notification, published on 13 April 2005, is available on the Ofcom website at:
http://www.ofcom.org.uk/consult/condocs/misselling/statement.pdf

These obligations were recently reviewed by Ofcom in order to see whether mis-selling of fixed-line telecommunications services had been addressed over the last two years to such an extent that it was appropriate to remove the current regulatory obligations. Ofcom’s conclusions were that, while there has been positive improvement over the last two years, we did not feel that sufficient progress had been made in reducing levels of mis-selling. Accordingly, Ofcom took the view that the obligations on Providers to establish, and comply with, codes of practice for sales and marketing activity in accordance with published Ofcom guidelines, should be retained. Ofcom’s Explanatory Statement and Notification, published on 21 May 2007, is available on the Ofcom website at: http://www.ofcom.org.uk/consult/condocs/missellingprotection/statement/statement.pdf

Background to the study and Schema’s report

Reducing instances of mis-selling remains a priority for Ofcom. However, in order for Ofcom to be effective in tackling problems related to mis-selling, it is vital that we have clear and accurate information about the true scale of mis-selling so that we are able to understand:

1. whether our stated policy intentions and actions are being effective in driving down complaint numbers; and
2. how we can improve, and how we should best prioritise and focus our activity going forward.

Ofcom currently measures levels of mis-selling of fixed-line telecommunications services using two separate measures, namely:

• Ofcom’s own mis-selling complaints data; and
• Industry ‘Cancel Other’^(-2-) (slam) reason codes.

Both measures are assessed in the aggregate, in order to track industry compliance levels, as well as individually against named Providers, and are used to inform Ofcom’s policy and investigations programmes.

However, there continues to be concern from stakeholders as to the extent to which both sets of measures represent an accurate assessment of levels of mis-selling.

In light of this, in January 2007, Ofcom commissioned Schema Associates Limited to undertake an independent study to investigate, and report on, the extent to which both sets of measures represented an accurate assessment of problems related to mis-selling. The Schema study had two specific objectives:

• first, to establish the accuracy of Ofcom’s mis-selling and slamming data and Cancel Other (slam) category data; and
• second, to provide recommendations on how the accuracy of the data could be improved to ensure that it is as accurate as possible.

Schema delivered their final report to Ofcom on 14 May 2007. At the request of Ofcom, and so that Ofcom could fully understand the implications of the research as it applied to individual companies, Schema’s report contained information that the companies subject to the research regarded as confidential. Therefore, some elements of the report will not be published by Ofcom. These are as follows:

• details of the response by individual Providers to Ofcom’s Request for Information relating to the study; and
• information on the conduct of particular Providers.

While this is largely a technical evaluation, Ofcom nevertheless considers that the general conclusions of Schema’s report should be made publicly available in order to assist with debate on the related issues.

[Note that during the course of the study, Schema was acquired by the major management and engineering consultancy, Mott MacDonald, and is now known as “Mott MacDonald Schema”].

Next Steps and inputs to other Ofcom work streams

Ofcom would like to highlight that the research and analysis carried out by Schema has already fed into Ofcom’s work such as:

• Ofcom’s current review of the Consumer General Conditions;
• improvements in the way the Ofcom Contact Centre handles consumer complaints;
• planned improvements in the Cancel Other process in order to make the process less open to abuse; and
• discussions with industry and individual companies on improvements to their sales and marketing activities, as necessary.

Footnotes:

1.- Formerly General Condition 14.3 prior to 19 June 2006. For ease of reference all references to General Condition 14.5 will be references to General Condition 14.3 prior to 19 June 2006.

2.- Cancel Other is the industry term for a functionality that enables the Provider losing the customer to cancel wholesale orders (during the switchover period) placed by an alternative Provider where slamming has been alleged by the customer.

• Investigation into Reported Levels of Telecoms Mis-selling and Slamming [pdf]
  Published 24|08|07

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