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31|07|07

Ofcom welcomes new code on mis-selling in mobile market but warns of consequences of failure

Ofcom today welcomed a new industry code of practice for mobile phone providers that aims to stamp out misleading sales and marketing practices in the mobile market. Ofcom warned, however, that formal intervention would soon follow should the industry initiative fail.

With more than 66 million active customer accounts, the UK mobile telephone industry is a mature and competitive market. Five mobile network operators (MNOs) compete for market share among themselves and, increasingly, with new mobile virtual network operators.

Competition brings benefits for consumers, such as lower prices and a greater range of services. However, it is important that those selling mobile services do not overstep the mark and seek to confuse or mislead consumers.

Unfortunately, there is growing evidence that a few are doing just that. Ofcom is currently receiving in the region of 400 complaints per month, a significant increase when compared to the number of complaints received at the end of 2006.

Ofcom is concerned about a significant increase in complaints since the beginning of the year relating to mis-selling of mobile phone services, involving mobile phone retailers either acting, or claiming to act, on behalf of MNOs.

Ofcom has discussed the nature of these complaints with MNOs directly and industry has responded with a code of practice which defines the best approach to promoting and selling mobile services.

The code of practice, published today by Ofcom, sets out:

• minimum business standards, including prohibited sales and marketing practices;
• how retailers must comply, including details of proactive monitoring by MNOs and possible sanctions;
• due-diligence exercises to determine which retailers should be engaged; and
• how complaints to MNOs should be monitored and handled.

Ofcom expects to see a significant reduction in the number of mis-selling complaints in the coming weeks as a result of this initiative. If it does not, it will move swiftly to assess more formal regulatory options to protect consumers.

“Competition in the mobile market has led to lower prices and a wide variety of valuable and exciting new services,” said Ed Richards, Ofcom Chief Executive.

“However, consumers must trust those that sell to them. We expect this new voluntary code of practice to stamp out mis-selling in mobile; if it does not, we will not hesitate to step in to protect consumers.”

The industry code of practice is published at http://www.ofcom.org.uk/telecoms/ioi/mbp/cop.pdf.

Ends.

NOTES FOR EDITORS AND CSEs

1. Mis-selling refers to inappropriate sales and marketing activities including ‘slamming’, where customers can be switched from one company to another without their express knowledge and consent.

2. Ofcom has received complaints about a number of issues related to mis-selling in mobile. These include cashback promotion schemes which offer – and then fail - to reimburse the consumer for a proportion of the line rental payable. Or slamming, where consumers are cold-called and offered an upgrade package with their current provider, only to find themselves then contracted to a different MNO.

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