Own-initiative investigation into Economy Calls Limited – adherence to its Code of Practice governing sales and marketing activity

30 April 2008

Complainant: Own-initiative investigation, following information gathered through Ofcom’s enforcement programme: ‘Monitoring and enforcement of the requirements regarding Codes of Practice for Sales and Marketing’, and complaints received by Ofcom
Complaint against: Economy Calls Limited (“Economy Calls”)
Case opened: 18 May 2007
Investigation closed: 14 November 2007
Case closed: 28 April 2008
Issue: Whether Economy Calls has complied with the requirement to adhere to 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, maintain and comply with a Code of Practice for Sales and Marketing for dealing with Domestic and Small Business Customers.

Update Note – 29 April 2008

As a result of breaches of Ofcom’s rules concerning sales and marketing of telecommunications services (mis-selling), Ofcom considered that as a part of its investigation monitoring of Economy Calls was appropriate.

Following the issue of the notification detailed below, Ofcom undertook monitoring of Economy Calls’ compliance in order to ensure that it became compliant and continued to comply with the requirements of GC14.5(b). This specific action was undertaken in addition to Ofcom’s ongoing industry-wide compliance monitoring.

We have been informed by Economy Calls that it has sold its customer base to another service provider and we understand that it is no longer operating as a communications provider.

On this basis Ofcom has now closed this case.

Update note – 29 November 2007

A non-confidential version of the Notification issued to Economy Calls Limited under Section 94 of the Communications Act 2003 on 14 November 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 1 April 2006 Economy Calls has failed, and is continuing to fail, to comply with the provisions of its Sales and Marketing Code of Practice (“the Code”) by:

  • failing to offer only factual and accurate information about Economy Calls services and misrepresenting the services offered by Economy Calls and other service providers;
  • failing to ensure that customers fully understand contract terms and want to transfer;
  • failing to offer clear and straightforward explanations; and
  • failing to provide adequate training of sales staff and agents in the content and interpretation of the Code.

Further, Ofcom has concluded that there are reasonable grounds for believing that, from 1 April 2006 to 1 June 2007, Economy calls has failed to comply with the provisions of the Code by:

  • failing to inform customers of the right to cancel a contract within 7 days of an agreement being made.

From 1 June 2007, Economy Calls made changes to its processes which appear to address Ofcom’s concerns about informing customers of their right to cancel.

On 14 November 2007 Ofcom issued a Notification under section 94 of the Communications Act 2003 to Economy Calls regarding its 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)”).

Economy Calls has until 17 December 2007 to comply with the requirements of GC 14.5(b). In particular Ofcom would expect that the steps Economy Calls takes to comply with the requirements of GC14.5 (b) may include, but are not limited to:

  • ensuring that, on making contact with customers or potential customers, Economy Calls’ representatives provide only factual and accurate information and do not misrepresent its services or those of other service providers;
  • ensuring that, on making contact, representatives provide only factual and accurate information about Economy Calls services and contracts;
  • ensuring that customers entering into a contract fully understand the terms of the contract, in particular whether a connection fee of £50 per line is applied as an administration charge, the length of the minimum contract term and that an early termination charge of at least £500 per line is payable in specified circumstances (those circumstances to be explained clearly at the time of entering into the contract); and
  • ensuring that all sales and marketing staff are trained thoroughly on the Code, and that its content and interpretation are explained fully; and that a copy of the Code is provided to all employees, agents and representatives.

Economy Calls has until 17 December 2007 to remedy fully any consequences arising from its contravention of GC 14.5(b).

Ofcom would expect that the steps Economy Calls 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 charges paid and/or otherwise payable by a customer:

  • to whom any misrepresentation was made by Economy Calls or one of its employees, agents or representatives;
  • to whom any inaccurate and misleading information was provided by Economy Calls or one of its employees, agents or representatives;
  • who was not clearly informed during the sales verification and/or compliance process of the fact that early termination fees would be payable where a customer seeks to transfer away from Economy Calls to another Communications Provider during the minimum contract period;
  • who was not clearly informed during the sales verification and/or compliance process of the method of calculating the early termination fee;

during the period 1 April 2006 to the date of the Notification, and/or

  • who was not clearly informed of the right to cancel a contract within 7 days and how to exercise that right during the sales process

during the period 1 April 2006 to 1 June 2007.

Alternatively, the Notification provides that by 17 December 2007 Economy Calls may make a proposal to Ofcom concerning the remedying of consequences by a specified date to be agreed by Ofcom (although Ofcom is not bound to accept such a proposal),

Economy Calls has until 17 December 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.

Text published when the case was opened

This investigation will examine whether Economy Calls has failed to comply with the requirements of its Code of Practice for Sales and Marketing established in accordance with General Condition 14.5.

Economy Calls is a communications provider offering fixed-line telephone services to business customers.

Ofcom has opened this investigation following an increase in the number of Economy Calls’ orders being cancelled using the ‘Cancel Other’ process. ‘Cancel Other’ is the industry term for a process whereby (during the 10 working day transfer period) the losing provider is able to cancel an order to switch a customer to another provider. The use of ‘Cancel Other’ is only permitted in certain circumstances, including where an allegation of mis-selling has been made by the customer or where the gaining provider fails to cancel a transfer upon the customer’s request.

Ofcom has also received complaints from small business customers who allege, amongst things, that they were mis-sold Economy Calls’ fixed-line telephone service, their fixed line telephone services were transferred without consent and/or that Economy Calls failed to cancel orders on request.

This investigation continues a sequence of Ofcom investigations into alleged misconduct by individual communications providers. These investigations form part of Ofcom’s commitment to reduce mis-selling within the fixed-line telecommunications market.

Case Leader: Sue Merrifield  e-mail: sue.merrifield@ofcom.org.uk
Case Reference: CW/00955/04/07