Investigation into FreeCall UK Ltd and Orb Communications Ltd regarding allegations of misconduct in selling and marketing of telecommunications services

01 March 2006

Complainant: Ofcom own-initiative, in conjunction with Birmingham Trading Standards
Complaint against: FreeCall UK Ltd ("FreeCall") and Orb Communications Ltd ("Orb")
Case opened: 31 August 2005
Case closed: 27 February 2006
Issue: Whether FreeCall and/ or Orb have complied with obligations under relevant consumer protection legislation and the requirement to have a Code of Practice for Sales and Marketing activity.
Relevant instruments:

  • Part 8 of the Enterprise Act 2002-
  • The Control of Misleading Advertisements Regulations 1988
  • The Trade Descriptions Act 1968
  • The Unfair Terms in Consumer Contracts Regulations 1999
  • The Consumer Protection (Distance Selling) Regulations 2000
  • Sections 94 to 104 of the Communications Act 2003 governing enforcement of the General Conditions.
  • General Condition 14.3 of the General Conditions of Entitlement governing the requirement to establish, and comply with, a code of practice for Sales and Marketing activity

During Ofcom’s investigation, Freecall and Orb each elected to leave the residential telecommunications market. Neither company has engaged in any selling to residential consumers since September 2005. In the case of Freecall, the company has now ceased trading altogether.

As part of the investigation, Ofcom secured widespread changes to the terms and conditions offered by Freecall and Orb to their remaining customers. These changes have served to address imbalances identified by Ofcom in the rights of existing customers against those of the companies.

Ofcom has also secured changes to Orb’s code of practice governing sales and marketing activity (relevant to both residential and small business customers) to reflect the necessary standards of conduct required.

Having secured outcomes for residential and small business customers that are consistent with Ofcom’s objectives, Ofcom has now closed its investigations into the activities of Freecall and Orb.

Should Ofcom receive similar complaints regarding any of Orb’s future sales and marketing activities Ofcom may investigate and also have regard to the previous evidence collected during this investigation.

Update note - 14 November 2005

Ofcom has received initial comments from both Freecall and Orb concerning the issues raised by Ofcom’s consultation under the Enterprise Act. Both Freecall and Orb have requested additional time to fully examine the detail of the allegations made against them and Ofcom has agreed to a single extension to 6 December in the case of Freecall and 29 November in the case of Orb, in order for each to provide a comprehensive response to Ofcom’s request to provide undertakings

End of update note


Text published when the case was opened

Ofcom has opened this investigation following more than 600 complaints from consumers and small businesses about fixed-line telecoms mis-selling by FreeCall and Orb, both communications providers based in the Birmingham area.

Ofcom has concluded that FreeCall and Orb have engaged in conduct likely to harm the collective interests of consumers and to constitute a breach of a number of obligations under consumer protection legislation, specifically:

  1. Breaches of regulations 7, 8, 10, 12, 24(4) and 24(5) of the Consumer Protection (Distance Selling) Regulations 2000, namely:
    1. Not telling consumers that they can cancel the contract if they change their minds within seven working days.
    2. Giving consumers seven calendar days instead of seven working days to change their minds.
    3. Not accepting cancellations of contracts from consumers.
    4. Requiring consumers to cancel contracts by recorded delivery post (FreeCall only);
    5. Demanding payment for services supplied to consumers that they have not agreed to; and
    6. Threatening to bring legal proceedings for payment of services supplied to consumers that they have not agreed to;
  2. Breaches of the Control of Misleading Advertising Regulations 1988 and/ or section 14 of the Trade Descriptions Act 1968, by making statements to consumers in the course of telephone conversations, or in writing, which may mislead consumers to believe that FreeCall is part of British Telecommunications plc ("BT"), authorised to act on BT's behalf, affiliated with BT other than by interconnecting with BT's network at the wholesale level or is BT; and
  3. Using contract terms that are unfair, contrary to the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCRs"). Ofcom, working with Birmingham City Council Trading Standards, has therefore commenced consultation with Freecall (and its directors Scott Ratcliffe and Boyd Donovan) and Orb (and its directors Scott Ratcliffe and Christian Pattihis) as required under Part 8 of the Enterprise Act 2002 with a view to ending the infringements and ensuring that there will be no repetition of the infringements in future.

Freecall (and its directors) and Orb (and its directors) have until 9 November 2005 to provide undertakings to Ofcom and Birmingham City Council Trading Standards not to continue or repeat the conduct and not engage in such conduct in the course of this business or another business. If such undertakings are not provided, Ofcom and Birmingham City Council Trading Standards can seek to apply to the court for an enforcement order under section 215 of the Enterprise Act 2002. Evidence gathered as part of Ofcom's industry-wide investigation also suggests that FreeCall and Orb have failed to comply with the requirement to establish and maintain a Code of Practice for Sales and Marketing under GC 14.3(a).

On 25 October 2005 Ofcom therefore issued notifications of contravention to both Freecall and Orb under section 94(1) of the Communications Act 2003 ("the Act") setting out their failure to comply with GC14.3 and giving Freecall and Orb until 28 November 2005 to comply with GC14.3.

If Freecall and/ or Orb do not comply with GC 14.3 by this date, Ofcom may issue an enforcement notification under section 95 of the Act and/or may impose a financial penalty under section 96 of the Act.

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 (CW00838) 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/00858/08/05