Own-initiative investigation into XLN Telecom Ltd regarding allegations of misconduct in selling and marketing of telecommunications services

22 November 2006

Complainant: Ofcom own-initiative investigation
Complaint against: XLN Telecom Ltd (“XLN Telecom”)
Case opened: 26 April 2006
Case closed: 25 October 2006
Issue: Whether XLN Telecom has breached the requirements of General Condition 14.5 (b) to comply with the provisions of its Code of Practice for Sales and Marketing activity.
Relevant instrument: General Condition 14.5 of the General Conditions of Entitlement governing the requirement to establish, and comply with, a code of practice for sales and marketing activity.

The obligations relating to Codes of Practice for Sales and Marketing were originally set out by General Condition 14.3. These were renumbered as General Condition 14.5 following other amendments to General Condition 14 which came into force on 19 June 2006 (see note 1 below).

Update Note – 22 November 2006

A non-confidential version of Ofcom’s notification of 25 October 2006 issued to XLN Telecom under section 94 of the Communications Act has now been prepared and is available from the link below.

End of update note

Summary

Ofcom has completed its investigation into XLN Telecom and has issued a notification to XLN Telecom under section 94 of the Communications Act 2003 (“the Act”).

Ofcom's investigation found that there are reasonable grounds to believe that XLN Telecom has breached Ofcom’s rules concerning sales and marketing activity by failing to comply with XLN Telecom’s Code of Practice for Sales and Marketing of fixed line telecommunication services (the “Code”).

The notification issued to XLN Telecom on 25 October 2006 sets out the breaches and the steps the company must now take. The Notification also requires XLN Telecom to remedy any consequences arising from its conduct. XLN Telecom has until 27 November 2006 (“the deadline”) to complete these actions and to make representations to Ofcom.

Specifically, XLN Telecom has failed to comply with the provisions of its Code by:

  1. Failing to ensure that on making contact, representatives state clearly that they represent XLN Telecom and offer only factual and accurate information about XLN Telecom’s services and contracts, and not misrepresent its services or those of other companies (page 2 of XLN Telecom’s Code);
  2. Failing to ensure that customers entering into a contract fully understand the terms, in particular the length of the contract and the level of the termination fee for terminating the contract within the term (pages 2-3 of XLN Telecom’s Code);
  3. Failing to ensure that the person entering into a contract with XLN Telecom is authorised to sign a contract for services and be responsible for bills at the premises in question (page 3 of XLN Telecom’s Code);
  4. Failing to ensure that XLN Telecom will terminate contracts without charge where customers had not understood the contract they entered into or had not agreed to a service transfer (page 4 of XLN Telecom’s Code);
  5. Failing to ensure that all sales agents working on behalf of XLN Telecom acted responsibly by conducting recruitment and training according to strict procedures (pages 1-2 of XLN Telecom’s Code); and
  6. Failing to ensure that the company’s remuneration systems are designed to discourage misleading sales practices (page 2 of XLN Telecom’s Code).

The notification requires XLN Telecom to comply with the requirements of General Condition 14.5(b) and remedy the consequences of its contraventions. Ofcom would expect that the steps XLN Telecom takes may include, but are not limited to refunding in full and/or waiving all early termination or other such fees paid and/or otherwise payable by a customer:

  1. to whom any misrepresentation was made by XLN Telecom or one of its employees, agents or representatives;
  2. who was not clearly informed during the transfer process of the length of the minimum contract term and/or the fact that early termination fees were payable and/or the nature of the early termination fee;
  3. whose telephony services were transferred to XLN Telecom without the consent of the person or persons authorised to do so; or
  4. who did not understand or intend to enter into the contract.

XLN Telecom has until the deadline to take steps both to comply with the provisions of its Code and remedy the consequences of its earlier failure to comply. If XLN Telecom does not comply by the deadline, Ofcom will consider whether further enforcement action, including a fine, is appropriate.

A non-confidential version of the notification and the accompanying explanatory statement are currently being prepared and will be published shortly.

Note 1

General Condition 14 was 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 came into force on 19 June 2006.

General Condition 14.3 was renumbered to General Condition 14.5. The obligations relating to Codes of Practice for Sal es and Marketing pursuant to General Condition 14.3 are now imposed by General Condition 14.5. The obligations have not changed, and only the numbering in General Condition 14 has. References to the obligations in General Condition 14.3 and General Condition 14.5 in this bulletin will be referred to as "General Condition 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.

Case Leader: Anthony Szynkaruk (email: anthony.szynkaruk@ofcom.org.uk)
Case Reference: CW/00897/03/06

Text published when the case was opened


Investigation into XLN Telecom Ltd regarding allegations of misconduct in selling and marketing of telecommunications services
Complainant : Ofcom own-initiative investigation
Complaint against : XLN Telecom Ltd (“XLN Telecom”)
Case opened : 26 April 2006
Issue : Whether XLN Telecom has breached the requirements of General Condition 14.3 (b) to comply with the provisions of its Code of Practice for sales and marketing activity.
Relevant instrument : 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.

Ofcom has opened this investigation following complaints about the sale of fixed line telecommunications services by XLN Telecom (company number 03902543). A number of complainants have alleged that they were misled during the initial sales calls made by XLN Telecom and/or that they have had their service transferred to XLN Telecom without consent.

This investigation continues 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 an active enforcement programme (CW/00838) to monitor compliance with regulations designed to prevent mis-selling in fixed-line telecoms and protect consumers from abuses such as ‘slamming'.

Case Leader: Anthony Szynkaruk ( e-mail: anthony.szynkaruk@ofcom.org.uk )
Case reference: CW/00897/03/06