Review of Alternative Dispute Resolution Schemes: Statement

22 August 2012

Executive Summary

1.1 Fair and effective complaints-handling processes protect consumers and empower them in their relationship with communications providers ('CPs'). Alternative Dispute Resolution ('ADR') schemes play an important role in complaints handling arrangements. They are operated by independent bodies which examine and make judgements about cases referred to them by consumers. The schemes can improve the outcome for consumers whose complaints might otherwise be unduly lengthy or remain unresolved.

1.2 The Communications Act 2003 ('the Act') places a duty on Ofcom to secure the availability of ADR procedures for domestic and small business customers. Through General Condition 14.5 we have required all CPs to be a member of an approved ADR Scheme. We currently approve two such schemes: Ombudsman Services: Communications ('OS') and the Communications and Internet Services Adjudication Scheme ('CISAS') ('the Schemes').

1.3 In May 2012, Ofcom published a consultation ('the May Consultation') to seek out stakeholders' views on a set of options proposed to help conclude our review of ADR Schemes ('the Review'). The Review had sought to assess whether the Schemes still met the approval criteria set out in the Act, which include the requirement that there should be consistent outcomes for consumers and small businesses, and CPs who used the Schemes.

1.4 In the May Consultation, we set out our view, based on the evidence available, that the Schemes met most aspects of the approval criteria. In particular, we noted significant improvements in accessibility and efficiency made by the Schemes during the course of the Review. The Review also indicated that reasonable decisions were being reached in over 90% of cases considered by the Schemes.

1.5 However, we identified that some aspects of decision making at the Schemes were leading to inconsistent outcomes for consumers in some circumstances, in particular in cases where evidence was lacking and where small awards of compensation might be considered appropriate for poor customer service.

1.6 We presented four options to address this issue. These were:
Option 1: Continue our approval of the Schemes.
Option 2: Modify the conditions of our approval. This would involve the introduction of a new condition of the approval requiring the Schemes to adopt a set of 'Decision Making Principles' including the development of guidelines on awarding compensation.
Option 3: Ofcom could invite the Schemes to agree between themselves a set of measures to meet the consistency objective.
Option 4: Withdraw our approval.

1.7 Our preferred option was Option 2.

1.8 The responses received from stakeholders were broadly supportive of the preferred option set out in the May Consultation.

1.9 Some stakeholders raised concerns about some of the detail and potential costs of the proposals, including the potential impact on compensation levels.

1.10 We consider that the impact of the proposals on costs and compensation levels will be limited. The Decision Making Principles are aimed at addressing some inconsistencies in decision making in a relatively small proportion of cases and we do not expect them to lead to significant additional costs or changes in compensation levels overall.

1.11 In addition to our proposals on the Principles, we received comments on our analysis of the Schemes against the existing criteria. In particular, some stakeholders expressed concern about CISAS's approach of limiting compensation awards to the amount requested by the consumer. CISAS has provided a list of circumstances where it will now consider awards beyond the amount requested. We believe this addresses concerns raised by stakeholders, and when implemented, will ensure that there is no constraint on the making of appropriate compensation awards at CISAS.

1.12 Having considered all responses, we have concluded that Option 2 - the introduction of a new condition to the approval requiring the Schemes to adopt a set of 'Decision Making Principles' including the development of guidelines on compensation - is the most appropriate way to addressing the issues we have identified in the Review.

1.13 The Schemes have confirmed their acceptance of the new condition. On this basis and given the findings of the Review that the Schemes meet the criteria set by the Act, we confirm the continued approval of OS and CISAS as ADR Schemes.