Own-initiative investigation into Universal Utilities plc trading as Unicom - adherence to its Code of Practice governing sales and marketing activity

24 July 2008

Complainant: Own-initiative investigation, following complaints received by Ofcom
Complaint against: Universal Utilities plc (“Unicom”)
Case opened: 18 December 2006
Investigation closed: 18 July 2007
Case closed: 30 June 2008
Issue: Whether Unicom has complied with its requirement to establish and 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.

Update note – 24 July 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 Unicom was appropriate.

Following the issue of a Notification under s94 of the Communications Act 2003 (the Notification) on 18 July 2007, Unicom was required to take steps to comply with the rules and to remedy the consequences arising from its conduct by 20 August 2007.

Ofcom undertook monitoring of Unicom’s compliance for 11 months in order to ensure that Unicom continued to comply with the rules and to remedy the consequences of any mis-selling. This specific action was undertaken in addition to Ofcom’s ongoing industry-wide compliance monitoring and enforcement programme into mis-selling.

Consumers who believed they met the criteria set out in the Notification and were refused a refund by Unicom, were invited to write to Ofcom setting out their concerns. Ofcom received eight representations from consumers who felt they were due a refund or release from their contract without an early termination fee. Ofcom reviewed these cases and found that seven of them did not meet the criteria set out in the notification and therefore the consumers were not entitled to a refund or the release of the contract without charge. The remaining case was copied to Ofcom for information only and the consumer received a refund from Unicom without any intervention by Ofcom.

On this basis Ofcom has now closed the case.

End of update note

Update note – 5 November 2007

In response to the notification issued to Unicom on 18 July 2007, Unicom wrote to Ofcom setting out its proposals to remedy the notified contraventions. Unicom will refund in full and/or waive all early termination fees paid or payable by any verbal telesales customer (i.e. a customer who was sold the service by a Unicom telephone sales operator):

  1. to whom any misrepresentation whatsoever was made by Unicom or one of its employees or representatives during the sales and/or sales verification process; and/or
  2. who was not informed during the sales process that the agreement was for three years; and/or
  3. who was not informed during the sales process that an early termination fee may apply; and/or
  4. who requested or appears to have requested further information from Unicom or one of its employees or representatives during the sales process as to the applicability and/or the level or method of calculating early termination fees, but was not provided with a full and accurate response

and who entered into a verbal sales agreement with Unicom between 8 th August 2006 and 18 th July 2007.

Unicom has also undertaken to make changes to its verbal telesales process and sales, marketing and training materials in order to address the concerns outlined by Ofcom in the notification.

Consumers who believe they are entitled to but have not received a refund in accordance with the criteria set out above should write to or email Unicom directly at the following address:

Emma Shaw
Compliance Manager
Unicom
Universal House
Longley Lane
Manchester, M22 4SY

Email: compliance@switchingon.com

Consumers who believe they meet the criteria set out above and who have written to Unicom directly and believe that they were incorrectly refused a refund should write to or email Ofcom at the following address:

Ian Vaughan
Ofcom
Riverside House
2a Southwark Bridge Road
London
SE1 9HA

Email: Ian.Vaughan@ofcom.org.uk

End of update note

Update note – 17 August 2007

A non-confidential version of the notification issued to Unicom under Section 94 of the Communications Act 2003 on 18 July 2007 has now been prepared and can be found at the link below.

End of update note

Ofcom has concluded that there are reasonable grounds for believing that since at least 8 August 2006 Unicom has failed to comply, and continues to fail to comply, with the provisions of its Code by:

  • failing to ensure its staff meet the expectation that they do not “ misrepresent any services offered by other service providers”; and
  • failing to ensure its staff meet the expectation that they be “ factual and accurate” and are “ able to explain the products and services provided by Unicom”.

Further, Ofcom’s investigation has concluded that there are reasonable grounds for believing that for the duration of the period May 2005 to July 2006 Unicom failed to comply with the provisions of its Code of Practice for Sales & Marketing by failing to “ ensure that its advertising and campaign literature is clear, concise, unambiguous, accurate and fair, and contains no false or misleading information regarding prices, savings, or benefits of any products or services offered by Unicom, or any of its competitors”. In July 2006 Unicom made changes to its advertising and campaign literature which appear to address Ofcom’s concerns.

On 18 July 2007 Ofcom therefore issued a Notification under section 94 of the Communications Act 2003 (the “Act”) to Unicom regarding past and ongoing contraventions of Ofcom’s rules concerning sales and marketing as set out in General Condition 14.5(b) (“GC 14.5(b)”).

Unicom has until 20 August 2007 to comply with the requirements of GC 14.5(b). In particular Ofcom would expect that the steps Unicom takes to comply with the requirements of GC 14.5(b) may include, but are not limited to:

  • ensuring all of its campaign literature is clear, concise, unambiguous, accurate and fair, and contains no false or misleading information regarding prices, savings, or benefits, of any products or services offered by Unicom, or any of its competitors[ (-1-)];
  • ensuring that on making contact, representatives provide only factual and accurate information about Unicom’s services and contracts;
  • ensuring that on making contact, representatives do not misrepresent its services or those of other service providers; and
  • ensuring that customers entering into a contract fully understand the terms of the contract, in particular the fact that an early termination fee is payable in specified circumstances and the level of, or method for calculating, that early termination fee.

Under the terms of the Notification, Unicom has until 20 August 2007 to remedy fully any consequences arising from its contravention of GC 14.5(b).

Ofcom would expect that the steps Unicom takes to remedy the consequences may include, but are not limited to, refunding in full and/or waiving all ‘breach of contract’ or other termination fees paid and/or otherwise payable by a customer:

  • to whom any misrepresentation was made by Unicom or one of its employees or representatives; and/or
  • who was not clearly informed during the sales and/or verification process of the fact that an early termination fee was payable where a customer seeks to transfer away from Unicom to another Communications Provider during the term of the contract; and/or
  • who was not clearly informed during the sales and/or verification process of the amount of, or method of calculating, the early termination fee

during the period 8 August 2006 to the date of the Notification.

Alternatively, the Notification provides that by 20 August 2007 Unicom may make a proposal to Ofcom concerning remedying of consequences by a specified date to be agreed by Ofcom (although Ofcom is not bound to accept such a proposal).

Unicom has until 20 August 2007 to make representations to Ofcom about the matters contained in the Notification and Explanatory Statement.

A non-confidential version of the notification is currently being prepared and will be published shortly.

Update note – 19 June 2007

Ofcom has decided to extend by one month its investigation into Unicom’s compliance with General Condition 14.5. Ofcom currently intends to conclude its investigation on or before 13 July 2007.

End of update note

Text published when the case was opened

Ofcom has opened this investigation following complaints from consumers who claim to have been mis-sold their fixed-line telephone service by Unicom or have had their service switched without their consent.

Ofcom's investigation will examine whether Unicom has failed to comply with the requirements of its Code of Practice for Sales and Marketing activity. General Condition 14.5 requires that communications providers establish, and comply with, a Code of Practice for sales and marketing.

This investigation continues a sequence of investigations Ofcom has commenced or will be pursuing into alleged misconduct by individual communications providers. These investigations form part of a wider campaign that includes an active enforcement programme (CW/00838) to monitor mis-selling in fixed-line telecoms and thereby protecting consumers from abuses such as ‘slamming' and mis-selling.

Case Leader: Ian Vaughan ( e-mail:Ian.Vaughan@ofcom.org.uk
Case Reference: CW/00941/12/06

Footnotes:

1.- Ofcom notes the changes made by Unicom in July 2006 have addressed Ofcom’s specific concerns, although Unicom is required to comply generally with GC14.5(b) in this regard