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31|03|08

Ofcom requires companies to sign up to complaints scheme and extends its probe into fixed-line mis-selling

Ofcom today announced an industry-wide investigation into compliance with the obligation to be a member of one of the dispute resolution schemes which are designed to deal with consumer complaints. It has also extended its investigation into mis-leading sales and marketing practices of landline phone services.

Under Ofcom rules, all communications providers must join an independent dispute resolution scheme (such as Otelo or Cisas). This investigation will particularly target all communications providers that are not a member of such schemes. Ofcom has asked companies to confirm either that they will join such a scheme or to provide evidence for not being classified as a communications provider. Ofcom will take action against providers who fail to join a scheme. Ofcom is able to levy a fine of up to 10 per cent of relevant turnover for non-compliance.

Action on mis-selling

Ofcom is also extending its investigation into mis-selling in the fixed line market. The investigation covers all types of mis-selling including:

• slamming, where a consumer is switched to another provider without their knowledge;
• when communications providers pass themselves off as other companies;
• when communications providers fail to provide important information to consumers, for example, the minimum contract duration or details of early termination fees; and
• when communications providers refuse or make it difficult for consumers to transfer to a different supplier.

Ofcom actively monitors all communications providers and the complaints it receives about them. It takes action if it finds evidence that a breach of the rules has taken place.

Ofcom opened an investigation programme when it introduced new rules to protect consumers from mis-selling and slamming in 2005 and took enforcement action against eight communications providers during this period, including fining one company the maximum 10 per cent of its relevant turnover.

This helped to reduce fixed line telephony mis-selling complaints to Ofcom from a peak of 1,200 per month in 2005 to around 350 per month in January 2008. However, the rise of new products such as those based on local loop unbundling is now fuelling an increase in consumer complaints which is why Ofcom is extending its investigation.

As a result of this general investigation Ofcom expects to issue enforcement notifications against a number of companies over the next few months to force them to clean up their practices and to protect consumers.

Ed Richards, Chief Executive of Ofcom, said: “Far too many consumers are being misled by fixed-line companies and this investigation will lead to take firm action against those who disregard the rules. We want to make sure that consumers are treated fairly and are able to take full advantage of the increasing choice and lower prices that competition is delivering.”

Ends.

NOTES FOR EDITORS

1. Local Loop Unbundling is a process where companies other than BT install equipment in BT’s telephone exchanges to offer consumers their own choice of service.

2. More information on the Ofcom approved ADR schemes can be found here:

Cisas http://www.cisas.org.uk/

Otelo http://www.otelo.org.uk

3. Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.

4. For further information about Ofcom please visit: http://www.ofcom.org.uk. Ofcom’s news releases can be found at: http://www.ofcom.org.uk/media/

CONTACT

Amber Peers

Media & Corporate Relations

Ofcom

ofcomnews@ofcom.org.uk

(+44) (0)20 7981 3033

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