How Oftel will handle complaints that terms in telecom service contracts are contrary to the requirements of either the Unfair Terms in Consumer Contracts Regulations 1999 or the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998

A Statement issued by the Director General of Telecommunications

March 2000

Contents

Summary

Chapter 1 Introduction

Chapter 2 Oftel’s new powers

Chapter 3 How to make a complaint

Chapter 4 What next?

Annex 1 The Unfair Terms in Consumer Contracts Regulations, 1999 Sections 4 – 14

Annex 2 The Telecommunications (Open Network Provision) (Voice Telephony) Regulations, 1998 Sections 15 – 16 and Schedule 1

Annex 3 Condition 10 of a standard PTO licence Requirement to offer contracts for telephone services

Annex 4 Illustrative concerns: Questions & Answers

Annex 5 Contacting Oftel and other named bodies

Glossary

Summary

1 Consumer protection is one of Oftel’s key objectives. This document sets out the new powers that the Director General of Telecommunications has been given to protect consumers from unfair or inappropriate telecom contract terms. It also explains when and how consumers should make complaints.

How the regulations fit with Oftel strategy

2 These Regulations fit with Oftel’s strategy – to protect and empower consumers – by setting out a framework of what would or would not be acceptable standard terms in telecom service contracts.

3 Oftel believes that working with the companies who provide various telecom services, discussing these Regulations and highlighting consumer concerns, will lead to them providing clearer contractual information to their customers. Better information permits consumers to take better-informed decisions. Consumers will gain further confidence from the fact that these Regulations also give Oftel rights to amend or remove unsuitable contracts terms where these do appear.

Consumer Rights

4 The Regulations are the Unfair Terms in Consumer Contracts Regulations, 1999 and the Telecommunications (Open Network Provision) (Voice Telephony) Regulations, 1998. Between them they set out a framework of basic standards and fairness, entitling consumers to:

• A written contract for their telephony service;

• Receive written variations to any existing telephony service contracts;

• Have certain standard terms or conditions of service provision in their contracts;

• Know that certain other terms or conditions which may be in their contract are appropriately worded; and

• Expect that all standard terms are fair.

5 It should be noted that there is a difference in the definition of ‘consumer’ used by these Regulations. The Unfair Terms in Consumer Contracts Regulations are designed to protect residential consumers from all sorts of unfair standard terms that might be in a contract. These Regulations define a consumer as a "natural" person who uses a publicly available telecommunications service for purposes that are outside his trade, business or profession. The Telecommunications (Open Network Provision) (Voice Telephony) Regulations have a different definition of a consumer which includes any residential or business customer.

Oftel’s role

6 Both sets of Regulations require that any action that Oftel takes be on a generic basis, rather than as the result of an individual complaint. Amending a standard term would affect all similar contracts so before seeking to change a term Oftel must be satisfied that the change would be in the interests of all relevant consumers. In addition, it needs to be stressed that these Regulations in no way supersede such rights as consumers have to individually re-negotiate any conditions of service or to take their individual disputes before the courts.

7 Because the Regulations both deal only with standard terms in standard consumer contracts Oftel anticipates that most of the terms it will need to deal with would have been brought to its attention by consumer bodies.

Overlap

8 One other issue dealt with in the document is the potential for overlap between the Regulations. For instance a term that specified an inadequate compensation mechanism to deal with situations such as a loss of the telephone service could contravene both Regulations. Oftel therefore believes it is sensible to create a common complaint handling procedure in which Oftel would be responsible for deciding which regulation if any was being contravened. This will ensure that all aspects of a complaint can be properly considered, rather than putting the onus on consumers to identify the precise legal route for a complaint.

Next steps

9 Although this is statement of future policy and practice, rather than a consultation document, views on any matters arising are welcome. If you have any views or questions on issues raised in the paper contact Nicholas Good in Oftel’s Regulatory Policy Directorate (tel: 0171 634 8839).

10 Alternatively if you wish to complain about a term in a consumer contract you should contact Oftel’s Helpline or e-mail advice@oftel.gov.uk – full details of alternative contact points listed in Annex 5.

Chapter One

Introduction

1.1 Better information will enable more consumers to take up more of the benefits of telecom service competition. These Regulations set out a clear framework of information regarding the kind of terms that should or should not be included in the contracts that consumers have with their providers of telecommunication services. However, the enforcement powers behind the Regulations should give consumers added confidence, knowing that if their contracts are unfair or inadequate Oftel can act to protect them by amending or removing unsuitable terms.

What is a telecom service contract?

1.2 Any customer taking a telecom service from a public telecommunications operator (PTO) or a systemless service provider will have a contract with that company.

1.3 Basic contract law requires that a valid contract meet the following criteria:

• It can only be made between parties able to undertake what they have promised to do;

• Both parties must intend to go through with their undertaking;

• The parties must have a shared understanding of the exchange;

• They will be proposing to pay or exchange something of value;

• The subject of the contractual exchange must be legal; and

• The undertaking must be fixed or fixable in terms of both duration and object.

1.4 In addition to these a telecom service contract must be in writing although it need not be signed.

Fair standard contracts

1.5 The Unfair Contract Terms Act 1977 established certain standards of fairness in relation to the terms of contracts that consumers have with major companies or institutions. That Act specifically allowed the Office of Fair Trading (OFT) to step in and mediate disagreements in relation to exclusion and limitation clauses.

1.6 The 1994 Unfair Terms in Consumer Contracts Regulations added to, but did not replace the 1977 Act. Those Regulations gave individual consumers the right to go to court if they believed that a term in the contract they had with a business was unfair. If the court agrees with the consumer the business will not be allowed to rely on the term. This is of course in addition to the role of the courts in settling disagreements between parties with regards to non-standard terms.

1.7 The 1994 Regulations also gave the Director General of Fair Trading powers to protect consumers in general by seeking to prevent the continued use of terms about which complaints have been received. However, importantly, he was not given any powers to take up individual consumer cases, or give consumers advice as to how best to seek compensation or other redress in a private dispute.

The Unfair Terms in Consumer Contracts Regulations, 1999

1.8 Following a public consultation in 1998 the Government decided to extend the scope of the 1994 Regulations. This was done with the revised Unfair Terms in Contract Contracts Regulations, 1999 (the ‘Unfair Terms Regulations’). In addition to the Office of Fair Trading, which continues to be obliged to consider any allegation of contractual unfairness, other bodies including Oftel were empowered to take actions to remove or amend unfair contract terms in their own spheres of influence. The bodies are listed in full in Schedule 1 of the Regulations. As with the 1994 Regulations, the new bodies are able to take action to protect consumers in general but do not have powers to take up individual cases, or give individual consumers advice as to how best to seek compensation or other redress in private disputes.

Telecommunications (Open Network Provision) (Voice Telephony) Regulations, 1998

1.9 In addition to the Unfair Terms Regulations, Oftel has gained other powers relating to terms in consumer contracts from the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998 (known as the ‘RVTD Regulations’ because they implemented the Revised Voice Telephony Directive (RVTD)).

1.10 The RVTD Regulations outline the type and content of terms that should be included in contracts for fixed and mobile telephony service provision both to residential and business consumers. Where possible these Regulations have been introduced into the licences granted under the Telecommunications Act 1984 to telecom system operators. The basic requirements are set out in Condition 10 of the standard Public Telecom Operator (PTO) licence – "The requirement to offer contracts for telephony services". However the Regulations apply equally to operators who provide telephony services without running their own systems (so-called systemless service providers) that do not need licences under the Act.

About this document

1.11 This document explains the new powers that Oftel has. Chapter 2 gives further details of the type of contract terms that could be contrary to either or both of the Regulations and sets out the different enforcement methods that apply. The possibility of an overlap between the Regulations, and how Oftel would decide which regulation was most appropriate, is also explained.

1.12 Chapter 3 goes on to guide potential complainants through the process of making a complaint, examines how the Regulations will be enforced, and gives an indication of how long an investigation could take. Chapter 4 sets out our conclusions and invites views on the planned new policy and practice in relation to the investigation of allegedly unfair or inappropriate contract terms.

1.13 The Annexes to the document provide extracts from the Regulations, the text of the licence condition, some sample questions and answers, and a list of contact points for further enquiries. Finally, there is a glossary of words and terms used in the paper.

Chapter 2

Oftel’s new powers

2.1 Oftel has been given powers to determine the suitability of standard contract terms by both the Unfair Contract Terms in Consumer Contracts Regulations 1999 and the Telecommunications (Open Network Provision) (Voice Telephony) Regulations, 1998.

Who are the Regulations designed to help?

2.2 These Regulations are intended to help consumers by protecting them and improving the quality of the information available to them. This is to be achieved by informing those who provide telecommunication services of their obligations to their consumers. In addition the Regulations allow Oftel and others to step in and amend standard contract terms that undermine the bargaining powers and general rights of consumers. Oftel believes that the Regulations will enable companies who provide telecommunications services to anticipate inappropriate terms and thus avoid using them when drafting consumer contracts.

2.3 The Regulations are not designed to supersede the role of the courts in dealing with individual contractual difficulties, nor do they give Oftel the right to advise consumers on how best to seek compensation or other redress in private disputes.

Unfair terms in consumer contracts

Oftel’s powers to investigate

2.4 The Unfair Terms Regulations relate specifically to unfair terms in contracts for any kind of service. The Regulations are a re-enactment of Directive 93/13. From 1 October 1999 Oftel, along with various other bodies (see list at the end of Annex 1) has been able to investigate allegations of unfair contract terms. Most of the bodies are utility regulators but the Consumers Association is also able to take up issues of unfairness. The government has indicated that other consumer bodies may be added to this list in the future.

2.5 The Regulations state that a consumer is not bound by a standard term in a contract with a seller or supplier if that term is deemed unfair. The fact that a consumer is not bound by a particular term in a contract does not necessarily mean that the rest of the contract becomes void. The contract, excluding the unfair term, will continue to bind the parties so long as it is capable of existing without the unfair term.

What is "unfair"?

2.6 Whether a contract term can be unfair depends on two issues:

• Does the term create a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer – ie does it unduly weight the contract against the consumer and in favour of the business?

• Does that imbalance appear to amount to a dishonest intention or an absence of good faith by the business?

Guidance from the Office of Fair Trading

2.7 As stated above the Office of Fair Trading (OFT) has been investigating unfair contract terms since the 1970s. Its powers were strengthened considerably by the 1994 Unfair Contract Terms Regulations and it is essentially those powers to assist consumers that have now been opened up to other bodies, including Oftel.

2.8 Oftel will use the guidance notes issued by the OFT in 1997 and due for revision in April if this year – Unfair Standard Terms Guidance for consumer advisors on the Unfair Terms in Consumer Contracts Regulations. Those notes include fuller definitions of "unfair" and "good faith", in addition to which they suggests a range of terms that in many circumstances would be considered unfair:

• Right not to provide services;
• Retention of pre-payments;
• Penalty clauses;
• General opt-out clauses;
• Right to terminate without notice;
• Automatic renewal clauses;
• Hidden terms;
• General variation clauses;
• Right to change what is supplied;
• Right to increase the price;
• Right of final decision;
• "Entire agreement clauses" and formality requirements;
• Unequal obligations;
• Right to assign without consent; and
• Restrictions on legal remedies.

2.9 However, it is important to realise that such contract terms are not automatically unfair – unfairness depends upon the effect of the wording and the type of contact involved.

Excluded terms

2.10 In addition there are certain terms that might appear to be unfair but are specifically excluded from the scope of the Regulations:

• A Core Term – defined as the main subject matter of the contract including the price to be paid for the service;

• A Mandatory Term – a term that has by law to be in a contract or is explicitly permitted, such as a limitation on liability for loss or injury. Although these, as with other terms, should always be written in plain language; and

• Specialized types of contract, such as those for employment, concerning succession rights, family law, or which cover the setting up and running of a business.

Procedure for investigating unfair terms

2.11 The Unfair Term Regulations enable the Director General of Fair Trading and the Director General of Telecommunications (‘the Director’) to consider any complaint that a contract term in a telecom service contract drawn up for general use is unfair.

2.12 The OFT has dealt with general issues, based upon a weight of complaints rather than on an individual complaints basis, and Oftel would expect to act in similar circumstances. Indeed, as stated above, the Regulations do not give Oftel powers to take up individual consumer cases in isolation, or give consumers advice as to how best to seek compensation or other redress in a private dispute including dispute resolution where relevant. Consumers would still need to take any individual contractual disputes that cannot be settled to court.

2.13 If the Director considers that a term is unfair his first step would be to approach the company concerned and, possibly, others who appear to be using the same or a similar term, and request an undertaking or undertakings that the term be removed or amended. Only if this approach does not resolve the matter would he consider bringing an action in the courts (see Chapter 3). On the basis of the OFT’s experience Oftel anticipates that most complaints of unfairness will be resolved by undertakings from the relevant operator(s).

The Revised Voice Telephony Directive

Powers to alter inappropriate terms

2.14 Anyone providing publicly available telephony services is obliged to do so in accordance with the Revised Voice Telephony Directive (RVTD), Directive 98/10/EC, enacted in the UK as the Telecommunications (Open Network Provision) (Voice Telephony) Regulations of 1998.

2.15 Amongst other things the RVTD Regulations allow Oftel to remove or amend terms in the telephony services provision contracts that both PTOs and systemless service providers have with their customers where those terms infringe the rights of customers. This applies equally to companies providing fixed and mobile public voice telephony and to residential and business consumers.

Basic requirements in Telecommunications Act Licences

2.16 The Regulations oblige telephony service suppliers to provide a written contract or written variations to an existing contract to their customers. In addition all contracts for the provision of telephony must either cover the following issues or refer the customer to publicly available terms and conditions which do cover them. A telephony contract must:

• Set out the service to be provided and give information on the service. For instance the ability to receive and make telephone calls over the supplier’s network and anything that the supplier may have to do such as changing telephone numbers, or codes, or removing service from people found to have made offensive or nuisance calls;

• Set out the supply time for initial connection, the types of maintenance service offered, and compensation or refund arrangements for subscribers which would apply if the contracted service is not provided; and

• Summarise the dispute resolution procedures the supplier has set up in accordance with provisions elsewhere in the RVTD Regulations.

2.17 These basic requirements have been incorporated into the licences held by PTOs under the Telecommunications Act and are enforceable under that Act.

Broader scope for enforcement

2.18 In addition other matters that may appear in telephony service contracts are covered by the RVTD Regulations but not stated in that licence condition. As is the case for systemless service providers who do not have Telecommunications Act licences, Oftel can enforce these Regulations through procedures outlined in the Regulations themselves (see below).

2.19 Unlike the Unfair Term Regulations, the RVTD Regulations are specific in that they only apply to matters subject to the provisions of the Regulations. However the RVTD Regulations are wide-ranging and cover such subjects as:

• Availability of service;
• Provision of network connections and access to telephone services;
• Provision of a Directory service;
• Specific disabled access and affordability provisions;
• Access to information with regards to quality of service;
• Itemised billing; and
• Selective call barring.

2.20 If the Director felt that the interests of consumers in general were being harmed by inappropriately worded standard contract terms or the incompleteness of appropriate contract terms relating to any of these issues he could seek to amend or remove the offending term.

Procedure for investigating terms contrary to the RVTD

2.21 As stated above, where a company providing telecoms services is licensed under the Telecommunications Act the RVTD Regulations specified in a Telecommunications Act licence condition will be enforceable through that Act (see Chapter 3).

2.22 Where a complaint relates to a non-core issue, outside of the licence condition, the RVTD Regulations allow the Director to make a Direction to alter the inappropriate term to protect the rights of users and subscribers to the service. This would also be the correct procedure where a systemless, and therefore unlicensed, service provider provides telephony services.

Overlap

2.23 Each of the sets of Regulations has its own character and purpose and provides different remedies. The Unfair Terms Regulations apply to unfair terms in any consumer contract, and defines consumer as a "natural" person. Whereas the RVTD Regulations apply only to the terms in telephony service provision contracts as well as setting out particular terms which must be included in all the contracts that both residential and business services have with their providers of telephony services.

2.24 But there is some overlap between the two sets of Regulations, as a term might be both unfair and contravene the RVTD Regulations. For example, a term that specified that a customer must make his own arrangements to repair faulty lines could be both unfair and unacceptable under the terms of the RVTD:

• Unfair as it could be a general opt-out of providing the service that is the subject of the contract;

• Unacceptable under the RVTD Regulations as such a term could be deemed to be failing to specify maintenance service.

Identifying the appropriate regulation

2.25 Because of the overlap Oftel has concluded that it would be inappropriate to put the onus on complainants to identify, when a complaint is made, which regulation is being contravened by an allegedly "bad" term. Oftel would be best placed to make that decision. The following illustrations show how the Regulations overlap and which regulation Oftel is most likely to use for enforcement action, depending on the nature of the term in question.

Figure 1: The Regulations

Figure 2: Enforcement Procedures

2.26 Figure 1 illustrates how terms required or forbidden by the RVTD Regulations – including certain basic terms (see paragraphs 2.16o 2.17bove) – could also be unfair. Whilst there are other terms that might only be contrary to the RVTD Regulations or only be unfair contract terms.

2.27 Figure 2 illustrates how Oftel would normally seek to rectify the term. All efforts would be made to settle a difficulty without recourse to formal enforcement action but if necessary Oftel would seek to resolve difficulties as swiftly as possible. The detail of how to make a complaint and what will happen next is covered in Chapter 3 but the principle is that Oftel will use whatever procedure will resolve a difficulty in the most straightforward and swift manner possible.

2.28 In practice this would probably mean using:

• The Telecommunications Act enforcement powers in the first instance; then

• Enforcement powers under the RVTD Regulations if necessary; and

• The Unfair Term Regulations powers, which involve court hearings and could therefore be more costly and time-consuming, only when terms cannot otherwise be rectified.

Chapter 3

How to make a complaint

3.1 Oftel is committed to having procedures for investigating complaints that are as straightforward as possible. This should ensure that case progress can be tracked internally and externally and will help Oftel’s procedures fit with those being used by other bodies, notably in relation to unfair contract term complaint investigations.

3.2 The following section outlines the different procedures involved and explains the flow of decision-making. In addition this is summarised in the following diagrams:

• Figure 3 sets out the initial Enquiry stage;

• Figure 4 explains how an Investigation of a breach of the RVTD Regulations would progress; and

• Figure 5 explains how an Investigation of a term under the Unfair Contract Terms Regulations would proceed.

Making a complaint

3.3 In common with other types of complaint, consumers should always attempt to resolve their complaint with their supplier before approaching Oftel.

3.4 If that fails to produce a satisfactory response, in this case a change in the term or a reasonable explanation of it, consumers may contact any of the relevant bodies listed in Annex 5. Any of these can advise which is the most suitable body but in general, if the dispute relates to a term in a telecommunications service contract, Oftel would be the appropriate regulator as it has a wider range of powers in this area.

3.5 Whatever the situation these bodies will endeavour to give you a full explanation as soon as possible. Oftel undertakes to acknowledge receipt of any complaint within 5 days.

Stage 1: Initial Enquiry

3.6 If the Director General decides in principle that a term might be unfair or, in relation to a term in a contract for telephony service provision that it might need to be altered to protect consumers, he will notify all parties of this conclusion. Notified parties would include other operators who have the same or substantially similar forms of term in their contracts. Upon receipt of notification all parties will have the opportunity to supply further information so that an initial decision on whether there is a matter suitable for investigation can be taken within 30 working days of the start of the investigation

3.7 The Director will state at or before the end of the 30 working days whether the term initially appears to him to be contrary to either the Unfair Terms Regulations or the RVTD Regulations. He may propose that the provider of telecommunication services remove or amend the contract term and request that an operator make a prompt initial response.

Figure 3: Initial Enquiry Stage

3.8 If a provider of telecoms services fails, within the specified timescale, to respond, or if he is refusing to suspend the use of the offending term the Director may take action according to which regulation is being contravened.

Stage 2: Investigation

3.9 At the end of Stage One Oftel will have formed an initial view that the term breaches one of the Regulations. An investigation to resolve the matter will then begin. This would usually last up to 3 months.

3.10 The length of the investigation will vary depending on the facts and which regulation appears to be contravened. For instance, it could be considerably longer than 3 months if court action is necessary or a full public consultation is. However, if within three months the matter is not settled Oftel will publish an interim report or draft proposals. The diagrams illustrate the stages but in more detail they are:

(a) Breach of RVTD Regulations

3.11 As Figure 4 shows, there are two main ways to enforce a decision on a term that Oftel believes breach an RVTD Regulations requirement:

(i) Enforcement Action under the Telecommunications Act 1984

3.12 Sections 16 and 17 of the Telecommunications Act 1984 deal with the ways in which the Director may enforce licence conditions. The requirement to offer a written contract and the minimum requirements of such contracts laid down by the RVTD Regulations are included as Condition 10 of standard PTO licences: "Requirement to offer contracts for telephony services".

3.13 Where these minimum requirements are not met, Section 16 permits the Director to issue provisional and final orders to enforce the licence condition. This enforcement action can only take place where the Director believes that a telecom operator is contravening or has contravened and is likely to contravene further any of the conditions in its licence. Provisional orders remain in force for a maximum of two months.

3.14 In addition to specifying what action is required orders must specify what is to be done and the Director must take into account any representations or objections from interested parties before making a final order. Those affected by a decision of the Director, including the licensee, can appeal to the Courts under provisions set out in The Telecommunications (Appeals) Regulations 1999 (which revise Section 18 of the Telecommunications Act).

(ii) Enforcement Action under the RVTD Regulations

3.15 Alternatively, where the Director believes that a provider of telecommunications services has inserted or failed to insert a term contrary to the requirements of the RVTD, but not expressly forbidden in a licence condition, he must consult publicly on his conclusion as to the unsuitability of the term. That consultation should be with such interested parties as seem appropriate. ‘Interested parties’ might include representatives of organisations running telecommunication systems, representatives of users, consumer, manufacturers and service providers.

Figure 4: Investigation of a term that breaches RVTD

3.16 If emergency action is required, even during the period of consultation, the Director may apply for an interim injunction if he was satisfied that customers were suffering significant financial loss or other hardship as a result of the presence of the undesirable term in their telecom service contracts.

(b) Breach of the Unfair Term Regulations

3.17 If, after an investigation of the allegedly unfair term, the Director concludes that a term should be removed or altered, the Director will request that the provider of telecommunications services amend the term.

3.18 As illustrated in Figure 5, if an operator refuses to amend the term voluntarily within a reasonable period, the Director will seek to change the term of this contract and, if appropriate, other like contracts as used by other operators. To do this the Director would apply to the courts for an injunction (an interdict in Scotland) to amend the term, either to delete it or to textually revise it.

3.19 As above, if emergency action is required, even during the above reasonable period, the Director may apply to the courts for an interim injunction, or interdict, to prevent the use of the term until a case can be fully argued in court. This would be appropriate where the customers were suffering significant financial loss or other hardship as a result of the presence of the unfair term in their telecom service contracts.

Figure 5: Full investigation of an unfair term

Chapter 4

What next?

Conclusions

4.1 With the publication of this document Oftel is setting out the procedure for investigating allegations that terms in consumer contracts for telecom services are unfair or inadequate.

4.2 The new powers will help Oftel in its wider strategy of protecting and empowering consumers. The Regulations set out a clear framework of what is acceptable practice. Oftel believes that this provides the opportunity to providers of telecommunications services to review and if necessary amend their contracts. Providers of telecommunications services should ensure that their contracts contain straightforward and suitable terms that are clear and easily understood by their customers. Such action would reduce the need for customers to complain. If complaints are made and upheld and matters resolved by agreement Oftel may not need to be directly involved in setting or amending contract terms.

4.3 Better information for customers will lead to more customers being able to take up more of the benefits of telecom service competition. This is consistent with the evolution to a more competitive market place. However, the enforcement powers behind these Regulations should give customers confidence; they will know that if their contracts are unfair or inadequate Oftel can act to protect them by amending or removing unsuitable contract terms.

Views are welcome

4.4 This is a statement of policy and practice, rather than a consultation document. However, Oftel would be pleased to discuss any matters arising from this statement. This could include issues from general enquiries to contract terms that could be contrary to the requirements of these Regulations.

4.5 Oftel is currently undertaking a review of the information it publishes to assist consumers. It is intended that the sections on how to make a complaint and the questions and answers (included in Annex 4) could form part of a general guide to consumers. Any comments on the clarity and usefulness of those sections in particular are welcome.

4.6 Depending on the nature of the enquiry you should either contact the Project Manager, Nicholas Good (telephone 0171 634 8839), or Oftel’s Consumer Helpline (0845 7145000). Other contact points are listed in Annex 5.

Annex 1

Excerpt from the Unfair Terms in Consumer Contracts Regulations, 1999

4. Terms to which these Regulations apply

(1) These Regulations apply in relation to unfair terms in contracts concluded between a seller or a supplier and a consumer.

(2) These Regulations do not apply to contractual terms which reflect-

1. mandatory statutory or regulatory provisions (including such provisions under the law of any Member State or in Community legislation having effect in the United Kingdom without further enactment);
2. the provisions or principles of international conventions to which the Member States or the Community are party.

5. Unfair Terms

6. Assessment of unfair terms

1. to the definition of the main subject matter of the contract, or
2. to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

7. Written contracts

8. Effect of unfair term

9. Choice of law clauses

These Regulations shall apply notwithstanding any contract term which applies or purports to apply the law of a non-Member State, if the contract has a close connection with the territory of the Member States.

10. Complaints – consideration by Director

1. the complaint appears to the Director to be frivolous or vexatious; or
2. a qualifying body has notified the Director that it agrees to consider the complaint.

11. Complaints – consideration by qualifying bodies

12. Injunctions to prevent continued use of unfair terms

(2) a qualifying body may apply for an injunction only where-

(a) it has notified the Director of its intention to apply at least fourteen days before the date on which the application is made, beginning with the date on which the notification was given; or

13. Powers of the Director and qualifying bodies to obtain documents and information

1. facilitating his consideration of a complaint that a contract term drawn up for general use is unfair; or
2. ascertaining whether a person has complied with an undertaking or court order as to the continued use, or recommendation for use, of a term in contracts concluded with consumers.

1. facilitating its consideration of a complaint that a contract term drawn up for general use is unfair; or
2. ascertaining whether a person has complied with-

i.  an undertaking given to it or to the court following an application by that body, or

ii. a court order made on an application by that body,

1. a copy of any documents which that person has used or recommended for use, at the time the notice is given, as a pre-formulated standard contract in dealings with consumers;
2. information about the use, or recommendation for use, by that person of that document or any other such document in dealings with consumers.

1. specify the way in which and the time within which it is to be complied with; and
2. be varied or revoked by a subsequent notice.

14. Notification of undertakings and orders to Director

1. of any undertaking given to it by or on behalf of any person as to the continued use of a term which that body considers to be unfair in contracts concluded with consumers;
2. of the outcome of any application made by it under regulation 12, and of the terms of any undertaking given to, or order made by, the court;
3. of the outcome of any application made by it to enforce a previous order of the court.

Schedule 1
QUALIFYING BODIES
PART ONE

1 The Data Protection Registrar

2 The Director General of Electricity Supply

3 The Director General of Gas Supply

4 The Director General of Electricity Supply for Northern Ireland

5 The Director General of Gas for Northern Ireland

6 The Director General of Telecommunications

7 The Director General of Water Services

8 The Rail Regulator

9 Every weights and measures authority in Great Britain

10 The Department of Enterprise Trade & Investment (Previously known as The Department of Economic Development in Northern Ireland)

PART TWO

11. Consumers’ Association

Annex 2

Excerpt from the Telecommunications (Open Network Provision) (Voice Telephony) Regulations, 1998

15. Contracts – public operators

(1) In exercising their functions under Part II and sections 47 to 49 of the Act, the Secretary of State and the Director shall ensure that public operators providing access to a fixed public telephone system or a mobile public telephone network or both shall, except where an existing contract complies with the requirements set out in paragraphs (2) and (3) below, offer to enter into, with each of its subscribers, either:

1. a new written contract; or
2. a written variation of an existing contract,

which new contract or contract as varied complies with the requirements set out in paragraphs (2) and (3) below.

(2) The contract referred to in paragraph (1) above shall specify the service to be provided or shall make reference to publicly available terms and conditions.

(3) The contract or publicly available terms and conditions shall specify at least:

1. the supply time for initial connection;
2. the maintenance service offered;
3. the compensation or refund arrangements for subscribers if the contracted service is not provided or both;
4. a summary of the dispute resolution procedures in accordance with regulation 37 below; and
5. information on service quality levels offered.

(4) The Director may direct, on his own initiative or following a request by an organisation representing user or consumer interests, that the conditions of contracts and of compensation or refund schemes or both which have been provided by public operators providing access to a fixed public telephone system or a mobile public telephone network or both, insofar as they concern matters subject to the provisions of these Regulations, shall be altered in order to protect the rights of users or subscribers or both. Any person who is a party to such contract shall be under a duty to comply with any such direction.

16. Contracts – systemless service providers

(1) A systemless service provider providing access to a fixed public telephone system or a mobile public telephone network or both shall be under a duty, except where an existing contract complies with the requirements set out in paragraphs 15(2) and (3) above, to offer to enter into, with each of its subscribers, either:

1. a new written contract; or
2. a written variation of an existing contract;

which new contract or contract as varied complies with the requirements set out in paragraph 15(2) and (3) above.

(2) The Director may determine, on his own initiative or following a request by an organisation representing user or consumer interests, that the conditions of contracts and of compensation or refund schemes or both provided by systemless service providers providing access to a fixed public telephone system or a mobile public telephone network or both, insofar as they concern matters subject to the provisions of these Regulations, shall be altered in order to protect the rights of users or subscribers or both. Systemless service providers and any other party to a contract shall be under a duty to comply with any determination made by the Director.

Annex 3

Condition 10 of the standard PTO Licence

REQUIREMENT TO OFFER CONTRACTS FOR TELEPHONE SERVICES

10.1  Where the Licensee runs a Public Telephone System, the Licensee shall offer either to enter into a contract with each of its Subscribers which complies with paragraph 10.2 or to vary an existing contract to comply with paragraph 10.2, except to the extent that the Licensee has already entered into a contract with these requirements.

10.2 The contract referred to in this Condition shall either specify the type of service offered and the terms and conditions on which the telephone service is to be provided under the contract or shall make reference to publicly available terms and conditions. The contract or publicly available terms and conditions shall at least specify, if relevant:

1. the supply time for initial connection;
2. the types of maintenance service offered;
3. the compensation or refund arrangements or both for the Licensee’s Subscribers which apply if the contracted service is not met and, if none are applicable, a statement to that effect;
4. a summary of the method of initiating procedures for the settlement of disputes; and
5. information on service quality levels offered.

10.3 The Licensee shall secure such alteration to the conditions of any such contract, and the conditions of any compensation or refund arrangements or both used by the Licensee, as the Director may direct pursuant to Regulation 15(4) of the Revised Voice Telephony Regulations.

Annex 4

Illustrative concerns: Questions & Answers

This section is intended to highlight some typical concerns that consumers may have about their contracts with their provider of telecommunications services. If consumers have any further questions they should contact Oftel or another of the consumer bodies listed in Annex 5.

When do I sign a contract for telecom services?

You may not need to sign a contract. Simply by receiving the service you will have entered into an agreement with a supplier and there will be terms or conditions to that agreement. That agreement is the contract and it should – in the case of a telephone service – be in writing. If you are burying a pre-paid mobile telephone you will not have signed a contract but will be subject to certain terms and conditions that should be in accordance with these Regulations.

How do I get a copy of my contract or a copy of any changes to my contract?

Those who provide telephony services are obliged to provide customers with a written copy of their contract. Most companies will provide this at the time when you agree to receive their services. For instance the standard contractual terms of BT and cable companies are on the back of the document you sign when you agreeing to take the service and Kingston Communications terms and conditions appear along with details of their Code of Practice in the front of their telephone directory. Mobile telephone contracts are often supplied with the handset. If you cannot find a copy of your contract you should contact the company who provides you with the relevant telecom service and request a copy.

What sort of terms should be in a telephony service contract?

Contracts for different services and with different providers of telecoms services may vary but the RVTD Regulations require that a telephony provision contract must cover the following issues or refer the consumer to publicly available terms and conditions which cover them:

• Set out the service to be provided and give information on the service. For instance the ability to receive and make telephone calls over the supplier’s network and the things that the supplier may have to do such as changing telephone numbers, or codes, or removing service from people found to have made offensive or nuisance calls;

• Set out the supply time for initial connection, the types of maintenance service offered, and compensation and/ or refund arrangements for subscribers which apply if the contracted service is not met; and

• Summarise the dispute resolution procedures the supplier has set up in accordance with provisions elsewhere in the RVTD Regulations.

Are there any terms that should not be in a contract?

In addition to terms which specifically exclude any of the above there should not be unfair terms in a contract.

Is there a definition of unfair?

Whether a contract term will be regarded as unfair depends on two issues:

• Does the term create a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer – ie, does it unduly weight the contract against the consumer and in favour of the business?

• Does that imbalance appear to amount to a dishonest intention by the business?

What kind of contract terms can be unfair?

Any term where there is no liability for death or injury or no liability for breaches of contract would be unfair. In addition the following terms could in many circumstances be considered unfair:

• Right not to provide services;
• Retention of pre-payments;
• Penalty clauses;
• General opt-out clauses;
• Right to terminate without notice;
• Automatic renewal clauses;
• Hidden terms;
• General variation clauses;
• Right to change what is supplied;
• Right to increase the price;
• Right of final decision;
• "Entire agreement clauses" ands formality requirements;
• Unequal obligations;
• Right to assign without consent; and
• Restrictions on legal remedies.

However, it is important to realise that contract terms are not automatically unfair. Unfairness would depend on the context: For instance the effect of the wording and the type of contact involved.

What can I do if I think that a term of my telecom service contract is inappropriate or unfair?

The first step, as with most consumer complaints, is to approach the company that provides your telecom service and ask them to explain the term that causes you concern.

If you do not feel that you have received a satisfactory response and believe that other consumers could be placed at a disadvantage by a certain term you can contact one of bodies listed at the end of Chapter 4. They can advise you of whether this is an issue that is suitable for investigation, already under investigation, or perhaps one that Oftel or OFT has already decided does not require investigation. Whatever the situation they will endeavour to give you a full explanation as soon as possible.

If Oftel, OFT or another body decides to take up my issue what will happen next?

We will keep you and others affected by the issue informed at all times.

In accordance with our normal investigation procedures Oftel would undertake to inform all complainants of an initial decision on whether there is a case to investigate within 28 days of receiving a complaint. Oftel would hope to resolve investigations within three months. However, in certain circumstances, particularly where we would need to seek court orders to enforce a decision, it may take longer. Oftel would undertake to keep all parties informed of the progress of an investigation whenever there are developments. Further detail of the procedures is given in Chapter 2.

What could be the outcome of an investigation into the fairness or appropriateness of a contract term?

If Oftel decides that a term is unfair or inappropriate it can order that the term is replaced or revised or in certain circumstances (ie, where it is unfair) it can seek a court order to remove or revise the term. In addition, if a term is unfair and it can be shown that consumers were financially disadvantaged by the presence of an unfair standard term, Oftel may be able to seek financial compensation from the provider of the relevant telecom service through action in the courts.

Annex 5

Contacting Oftel

Oftel has a dedicated section on its website to help deal with consumer enquiries. A Consumer Helpline service is also available.

Oftel recommends that consumers contact the company that provides the relevant telecom service and try and resolve any problems. Only if they have been through all the company’s complaints procedures and the difficulty has still not been resolved, consumers can contact Oftel in the following ways:

In writing:

Oftel
50 Ludgate Hill
London
EC4M 7JJ

Consumers resident in England

• Telephone Oftel on local rate number 0845 714 5000
• E-mail – advice@oftel.gov.uk
• Web site – www.oftel.gov.uk

Consumers resident in Scotland

Contact the Scottish Advisory Committee on Telecommunications (SACOT)

• E-mail – sacot@acts.org.uk
• Telephone SACOT on local rate number 0845 714 5000

Consumers resident in Wales

The Welsh Advisory Committee on Telecommunications (WACT)

• E-mail – wact@acts.org.uk
• Telephone WACT on local rate number 0845 714 5000

Consumers resident in Northern Ireland

The Northern Ireland Advisory Committee on Telecommunications (NIACT)

• E-mail – niact@acts.org.uk
• Telephone NIACT on local rate number 0845 714 5000

Calls to the Helpline may be monitored for training purposes.
Consumers are advised to check with their phone companies for local rate tariff details.

Contacting other bodies named in the Regulations

Trading Standards Officers

See local telephone directory for nearest office

Office of Fair Trading (OFT)

Unfair Contract Terms Unit – public liaison number – 0171 211 8446

• Web site -www.oft.gov.uk

Glossary

Class licence – a licence granted by the Secretary of State to a class of people which permits any within the relevant class to provide specified services without the need for an individual licence or, in certain circumstances, the need to register the system or provide the service.

Consumer – this is defined differently by the two Regulations:

• For the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 a consumer is any natural person who uses a publicly available telecommunications service for purposes which are outside his trade, business or profession.
• In relation to Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998, a consumer is any residential or business customer.

Customer – a person who buys or contracts to buy goods or services from a business

Director General – The Director General of Telecommunications.

Licence – an authorisation under the Telecommunications Act 1984. This could be a Class Licence (see above) or an individual licence granted to a particular person or company to undertake certain licensable activities, such as operating a public telecommunications system.

Provider of telecommunications services – anyone who provides a publicly available telecommunications service (including telephony service). This would include both a public telecommunications operator and a systemless service provider (defined below).

Public Telecommunications Operator (PTO) – A person to whom a licence has been granted under section 7 of the Telecommunications Act 1984 authorising the running of a public telephone system and the provision of publicly available telephone services.

Public telephone system – Telecommunication system forming part of the fixed public telephone network (or a mobile pubic telephone network).

The Regulations – in this context means either the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998 (the ‘RVTD Regulations’) or the Unfair Contract Terms in Consumer Contracts Regulations 1999 (the ‘Unfair Terms Regulations’).

The Revised Voice Telephony Directive (RVTD) – means Directive 98/10/EC of the European Parliament and of the Council on the application of open network provision to voice telephony and on universal service for telecommunications in a competitive environment.

Seller or supplier – any person or organisation acting for the purposes of their business. Under the Unfair Contract Terms Regulations "business" includes any trade or profession and the activities of governmental and other public bodies.

Service Contract – a contract in this context for telecommunication services or services with a predominant telecommunications component. This could be with a PTO direct or with a provider of a telecom service.

Service Provider – means a provider of telecommunication services, or services with a telecommunication service component, to third parties whether over its own network or otherwise.

Standard terms – those terms of a contract devised by a business in advance, not individually negotiated, with the consumer. They are typically found in ‘small print’ on the back of order forms and bills, but do not have to be in writing. The Unfair Contract Term Regulations can apply to the standard terms of a contract even if other terms have been individually negotiated.

Subscriber – A person who is party to a contract with the provider of publicly available telecommunications services for the supply of such services.

Systemless service provider – A person who provides publicly available telephone services but who does not run a telecommunication system within the meaning of section 4 of the Telecommunications Act 1984 by means of which such services are provided.

Telecommunications Act – The Telecommunications Act 1984

User – A person using or requesting publicly available telecommunications services.

Voice telephony service – A service available to the public for the commercial provision of direct transport of real-time speech. This service is provided over the public switched network, or networks, such that any user can use equipment connected to a network termination point at a fixed location to communicate with another user of equipment connected to another termination point.