Own-initiative investigation: Monitoring and enforcement of the requirements regarding Codes of Practice for Sales and Marketing

31 May 2007

Complainant: Ofcom own-initiative investigation
Investigation against: Communications Providers who provide fixed-line telecommunications services or the wholesale inputs to those services and engage in sales and marketing activity
Case opened: 27 May 2005
Case Closed: 25 May 2007
Issue: Compliance with the requirement to establish and comply with a code of practice on sales and marketing
Relevant instrument: General Condition 14[ (-1-)] of the General Conditions of Entitlement

Ofcom has closed this monitoring programme. A report on the activities carried out under it has been prepared (see end of page).

Ofcom has opened a new investigation to monitor compliance with the requirement to establish and comply with a code of practice for sales and marketing and the use of information obtained during the transfer process. Further information can be found on the separate Competition Bulletin entry entitled 'own-initiative investigation: monitoring and enforcement of mis-selling and conduct relating to the transfer of customers between communications providers'.

Update note – 27 November 2006

Reducing instances of mis-selling and slamming remain a priority for Ofcom and therefore Ofcom has decided to continue its programme of active monitoring and enforcement for a further 6 month period.

Ofcom will continue to monitor industry data and examine evidence which suggests that communications providers are not complying with the requirements of their Code of Practice for sales and marketing. Ofcom will open investigations and/or move to take enforcement action where appropriate.

Open Investigations

CW/00924/10/06 – Scottish and Southern Energy

Closed Investigations

CW/00897/03/06 – XLN Telecom Ltd

CW/00896/03/06 – Platinum Telecom UK Ltd

Update note – 1 June 2006

Ofcom has now completed the first 12 months of its programme to actively monitor and enforce rules protecting consumers from mis-selling in fixed line telecommunications services. Ofcom will continue this programme of active monitoring and enforcement for a further 6 month period.

Since the programme commenced, Ofcom has opened separate investigations into six communications providers. Details of these investigations and the enforcement action Ofcom is currently engaged in are available from the following Competition Bulletin entries:

Open Investigations

CW/00897/03/06 – XLN Telecom Ltd

CW/00896/03/06 – Platinum Telecom UK Ltd

Closed Investigations

CW/00857/08/05 – Just Telecomms UK Ltd (trading as Lo-Rate)

CW/00858/08/05 – Freecall UK Ltd 

CW/00858/08/05 – Orb Communications Ltd

CW/00860/08/05 – Universal Telecom Ltd

End of update note

Update note – 30 November 2005

Ofcom has completed the first 6 months of its programme to actively monitor and enforce rules protecting consumers from mis-selling in fixed-line telecommunications services.

Ofcom will continue this programme of active monitoring and enforcement for a second 6 month period. Ofcom will examine evidence which suggests that a communications provider is not complying with the requirements of its Code of Practice and will open investigations and take enforcement action where required.

Since the programme commenced, Ofcom has secured widespread compliance with the requirement to establish a Code of Practice for sales and marketing activity. In addition, Ofcom has launched specific investigations into the activity of four communications providers following evidence of complaints from consumers and small businesses. Details of these investigations and the enforcement action Ofcom is currently engaged in are available from the following Competition Bulletin entries:

CW/00858/08/05 – Freecall UK Ltd

CW/00858/08/05 – Orb Communications Ltd

CW/00857/08/05 – Just Telecomms UK Ltd (trading as Lo-Rate)

CW/00860/08/05 – Universal Telecom Ltd

End of update note

Update note - 4 October 2005

Ofcom has now completed the first phase of its investigation monitoring compliance with new regulations designed to prevent mis-selling in fixed-line telecommunications services. General Condition 14.3 requires fixed-line telecommunications providers to establish and comply with a code of practice for sales and marketing, in accordance with published guidelines.

Ofcom has analysed over 35 individual providers' Codes to determine whether those Codes are consistent with published guidance. At the outset of this process, Ofcom considered that only 3 communications providers had established appropriate Codes.

However the investigation has secured changes across the industry as providers have chosen to amend their Codes without the need for further enforcement action by Ofcom. Ofcom continues to actively monitor the situation and will respond swiftly to any evidence that a provider's Code is not consistent with the guidelines.

Ofcom's investigation also continues to examine evidence of consumer complaints about mis-selling of fixed-line telecommunications services. Ofcom is investigating whether communications providers are complying with the requirements of their Code of Practice.

Where the evidence suggests a communications provider is not complying with its Code, Ofcom may open a separate full investigation into that provider. Such investigations will be announced via Ofcom's Competition Bulletin.

End of update note

Text published when case was opened

On 13 April 2005 and following public consultation, Ofcom issued a statement and notification on the effectiveness of consumer safeguards designed to protect consumers from mis-selling of fixed-line telecommunications services. In light of the responses to the consultation, Ofcom concluded that mis-selling of fixed-line telecommunications services is and has been a problem and that this fact, together with further risks to consumers should mis-selling continue to grow, justified the introduction of additional regulatory safeguards.

From 26 May 2005, General Condition 14 requires communications providers who provide fixed-line telecommunications services and engage in sales and marketing activity, to establish, and comply with, a code of practice for sales and marketing in accordance with published guidelines.

This investigation will be a programme to actively monitor compliance in the industry with amended General Condition 14 and respond swiftly and effectively to any failure to comply.

Case Leader: Ian Vaughan ( e-mail:Ian.Vaughan@ofcom.org.uk)
Case Reference: CW/00838/05/05

Footnotes:

1.- General Condition 14 was further amended following consultation by the Notification of Modification to a General Condition “Providing citizens and consumers with improved information about Number Translation Services and Premium Rate Services” published by Ofcom on 19 April 2006, which entered into force on 19 June 2006. As a result, the obligations relating to establishing and complying with a code of practice for sales and marketing pursuant to General Condition 14.3 are now imposed by General Condition 14.5. The obligations have not changed, though the numbering in General Condition 14 has. Further references to the obligations in General Condition 14.3 and General Condition 14.5 in this explanatory statement will be referred to as “GC 14.5” for ease of reference, though any references to the operation of these obligations prior to 19 June 2006 will be in respect of General Condition 14.3.