Complainant: Ofcom own-initiative investigation
Complaint against: Just Telecomms UK Ltd (‘JTUK'), trading as Lo-Rate Telecom
Case opened: 31 August 2005
Investigation closed: 27 February 2006
Case closed: 31 October 2008
Issue: Whether Just Telecomms UK Ltd (trading as Lo-Rate Telecom) has complied with the requirements of General Condition 14.3(b) (compliance with the provisions of a Code of Practice for sales and marketing activity) and/or General Condition 13.1 (measures to effect payment or disconnection)
Update note – 3 November 2008
As a result of breaches of Ofcom’s rules concerning sales and marketing of telecommunications services (mis-selling), Ofcom considered that following its investigation, monitoring of JTUK was appropriate. As reported below Ofcom had previously served an enforcement notification and imposed a financial penalty on JTUK
Ofcom undertook monitoring of JTUK’s compliance in order to ensure that JTUK adhered to the enforcement notification by paying refunds to affected customers, providing Ofcom with reports on customer contact and refunds paid and co-operated fully with the adjudications of the Telecommunications Ombudsman scheme (Otelo).
JTUK produced regular reports to Ofcom as part of the compliance process. The compliance reports from JTUK have been monitored to confirm whether it has complied with the terms of the enforcement notification.
Ofcom has completed its monitoring in this matter. The compliance reports show that JTUK has taken appropriate action to remedy instances of mis-selling to customers on a case by case basis as required under the enforcement notification.
On this basis Ofcom has now closed the case.
End of update note
Update Note – 12 July 2006
A non-confidential version of Ofcom’s enforcement notification of 23 June served on JTUK under sections 95 and 96 of the Communications Act has now been prepared and can be found at the bottom of this page.
End of update note
Update Note – 27 June 2006
On 23 June 2006 Ofcom served an enforcement notification and imposed a penalty on JTUK under sections 95 and 96 of the Communications Act. Ofcom has concluded that JTUK has contravened General Condition 14.3(b) in relation to sales and marketing activity and that it has failed to remedy the consequences of that contravention within the one month specified in the Section 94 notification issued to JTUK on 14 March 2006.
Ofcom has imposed the maximum financial penalty of 10% of relevant turnover on JTUK. This decision reflects the serious nature of JTUK’s contravention. Since JTUK's turnover has not been disclosed in published management accounts to date, the exact amount of the penalty may be confidential and is not being published by Ofcom at the present time.
In addition to imposing a financial penalty, Ofcom is also requiring JTUK to:
Full details of the action which JTUK is now being required to take are set out below.
On 14 March 2006 Ofcom issued a notification under s94 of Communications Act to JTUK setting out Ofcom’s conclusion that it had reasonable grounds for believing that JTUK had failed to comply with the provisions of its Code of Practice for Sales and Marketing. Ofcom specified a period of one month for JTUK to make representations to Ofcom about the notified contraventions and remedy any consequences of those contraventions.
Having taken account of those representations and having carefully considered all of the available evidence, Ofcom has now decided that JTUK:
(a) has failed to comply with relevant provisions of its Code of Practice for Sales and Marketing (representing a contravention of General Condition 14.3(b)); and
(b) has not, during the period specified by Ofcom, taken all such steps as Ofcom considers necessary for remedying the consequences of the contravention.
JTUK’s contravening conduct took two particular forms:
Ofcom regards this case as being particularly serious. JTUK’s engagement in mis-selling was co-ordinated, systematic and affected a large number of consumers. Despite well-founded complaints coming to the attention of JTUK’s senior management team, JTUK failed to take effective action to prevent further mis-selling from taking place; and at least one member of senior management was actively involved in the promotion of mis-selling activity by its sales staff.
JTUK customers who sought to leave JTUK for another service provider were charged ‘breach of contract’ fees of up to £395 + VAT per line, and threatened with disconnection if they did not pay those fees immediately. As a result, some people who only became JTUK’s customers in the first place as a result of misrepresentations having been made to them over the phone were subsequently stung with high ‘breach of contract’ fees when they tried to revert back to their original provider.
Action to be taken by JTUK
JTUK is now required to take steps for remedying the consequences including:
A non-confidential version of Ofcom’s notification is currently being prepared and will be published shortly.
Additional Note: in publishing this update to the Competition Bulletin, Ofcom has also amended the previous entries for this case in order to refer consistently to Just Telecomms UK Ltd as ‘JTUK’ throughout. JTUK trades under the trading name or style “Lo-Rate Telecom” and should not be confused with any other company, including Just Telecomms Ltd.
End of update note
Update Note – 15 March 2006
Ofcom has issued a revised enforcement notification under section 94 of the Communications Act 2003 to JTUK. The revised notification includes clarification that the notification applies to all the activities of JTUK, not only those services provided under its Lo-Rate Telecom brand.
Accordingly, the timescales by which JTUK shall complete the actions specified in the notification have been amended to 22 March 2006, in respect of those obligations imposed via section 98 of the Act, and 15 April 2006 in respect of all other obligations. JTUK therefore has until 15 April 2006 to identify and respond to customers who have been harmed by its conduct including, in some circumstances, the payment of refunds to customers.
End of update note
Ofcom has closed this investigation and issued an enforcement notification to JTUK (trading as Lo-Rate Telecom) under section 94 of the Communications Act 2003. Ofcom's investigation found that JTUK has engaged in serious and repeated breaches of rules concerning both sales and marketing activity and disconnection of service following imposition of termination charges. Ofcom's action follows evidence gathered by Ofcom and Hertfordshire Trading Standards.
The enforcement notification issued to JTUK sets out the nature of the breaches and the steps the company must take to comply with its obligations. In light of the serious nature of misconduct in this case and the ongoing risk of damage to its customers, Ofcom has used powers under section 98 of the Communications Act 2003 to require action to be taken by JTUK on certain obligations by 7 March 2006. It has until 29 March 2006 to comply with a number of other obligations.
The enforcement notification also specifies the steps JTUK must take to identify and respond to customers who have been harmed by its conduct. JTUK has until 29 March 2006 to complete these actions including, in some circumstances, the payment of refunds to customers.
A non-confidential version of the notification is currently being prepared and will be published shortly.
Ofcom's investigation followed more than 800 individual complaints from small business customers of JTUK. Ofcom has reasonable grounds to believe that JTUK has engaged, and continues to engage, in conduct which includes:
In reaching its conclusions, Ofcom's investigation considered evidence gathered by Hertfordshire Trading Standards. This evidence includes telephone scripts used by sales staff of JTUK containing statements which, in Ofcom's view, are deliberately misleading.
Action to be taken by JTUK
JTUK has until 29 March 2006 to comply with the obligations set out in the notification except where, as referred to above, Ofcom has required JTUK to take more immediate action by 7 March 2006. The enforcement notification also requires JTUK to identify affected customers in order to remedy its misconduct. Specifically, Just Telecoms is required by 29 March 2006 to do the following (where customers meet the criteria set out in the section further below):
Customers qualifying for refund or exit from contract
Both past and current customers might be entitled to a refund or exit from their agreement without penalty as referred to above. Any past or current customer falling into any of the categories listed below will qualify for such entitlement.
Any past or present customers of JTUK for whom these requirements might be relevant should contact the company to exercise their rights.
Consequences of failure to comply with Ofcom's enforcement notification
Where a customer believes that JTUK has failed to meet its obligations in terms of providing a refund or opportunity to exit from contract by 29 March 2006, they should contact Ofcom in writing at Ian.Vaughan@ofcom.org.uk after that date setting out the facts of their situation.
If JTUK fails to comply with GC 14.3(b) and GC 13.1 and/ or fails to take the action required by the notification issued to it (for example, if it fails to fully comply with the obligation to make repayment of termination payments as set out above), Ofcom may issue a further enforcement notification under section 95 of the Act and/or may impose a financial penalty (of up to 10 per cent of turnover) under section 96 of the Act.
Text published when the case was opened
Ofcom has opened this investigation following complaints from small businesses about the mis-selling of fixed-line telecoms by JTUK UK Limited (company number 05307650). JTUK is a communications provider based in Hertfordshire trading under the name Lo-Rate Telecom.
Ofcom's investigation will examine whether JTUK has failed to comply with the requirements of its Code of Practice for Sales and Marketing activity. General Condition 14.3 requires that communications providers establish, and comply with, a Code of Practice for sales and marketing.
Compliant Codes set out a minimum standard of behaviour in areas such as promotion and marketing, sales, customer contact and the process of entering into a contract with customers.
Ofcom notes that this investigation concerns the activities of Just Telecomms UK Limited (company number 05307650). There are a number of alternative communication providers using the word 'Just' in their name or brand, who have no link to Just Telecomms UK Limited. In particular, as far as Ofcom is aware there are no links between Just Telecomms UK Limited and Just Telecomms Limited, trading in Lincolnshire .
This investigation is part of a sequence of investigations Ofcom has commenced or will be pursuing into misconduct by individual communications providers. These investigations form part of a wider campaign that includes the active enforcement program (CW/00838) to monitor compliance with new regulations designed to prevent mis-selling in fixed-line telecoms and protect consumers from abuses such as 'slamming'.
Case Leader: Ian Vaughan ( e-mail:Ian.Vaughan@ofcom.org.uk)
Case Reference : CW/00857/08/05