Investigation into giffgaff about its compliance with metering and billing requirements

Following our investigation, Ofcom has today issued a Confirmation Decision to giffgaff under s96C of the Communication Act 2003 (the “Act”) for contravening what was at the time GC 11.1 of the General Conditions. Ofcom and giffgaff entered into a settlement process in respect of this matter and giffgaff wrote to Ofcom on 22 July 2019, admitting its liability in relation to the nature, scope and duration of the contravention.

In light of the evidence and giffgaff’s admissions, Ofcom is satisfied that giffgaff contravened GC 11.1 as a result of a billing error that meant customers received inaccurate bills and were overcharged.

giffgaff offers pre-paid bundles of voice minutes, SMS (texts) and data known as “goodybags”. Customers can also purchase pre-paid top-up credit. Ofcom has found that giffgaff contravened GC 11.1 by overcharging customers who purchased a goodybag while using pre-paid credit to consume data or while on a voice call. The purchase of a goodybag should have made any data use or voice call free. However, giffgaff did not immediately apply the goodybag that the customer had purchased to their account. As a result, a customer’s pre-paid credit continued to be used to pay for data use or a voice call when it should have been free as a result of the purchase of the goodybag.

This billing error affected giffgaff’s data services between 26 May 2011 and 15 June 2018 and affected its voice services between 26 May 2011 and 14 February 2019. giffgaff has estimated that it overcharged around 2.6 million customers up to almost £2.9 million over a 7 - 8 year period as a result of its billing error.

In light of seriousness of this case, including the failings we have found, the Confirmation Decision imposes a financial penalty of £1.4 million on giffgaff in respect of its contravention of GC 11.1.

In setting the penalty, we have had regard to our penalty guidelines. The penalty reflects a number of factors including the objective of deterrence and the seriousness of the contravention, including our findings that giffgaff failed to take appropriate steps to prevent the billing error, its senior management should have been aware of the billing error much earlier and giffgaff missed opportunities to identify, escalate and remedy the billing error.

The penalty would have been significantly higher had giffgaff not self-reported the contravention, co-operated closely with our investigation and proactively taken steps to remedy the contravention following discovery of the issue, including implementing a comprehensive refund plan. It is important that communications providers (“CPs”) take compliance with their regulatory responsibilities seriously and that when things go wrong, they recognise this and act quickly and responsibly to remedy any harm that has been caused and allow Ofcom to investigate, as appropriate. Notwithstanding the failings we have found in this case, we strongly encourage CPs to take note of giffgaff’s conduct in this respect.

The penalty also includes a 30% discount from the penalty that Ofcom would otherwise have imposed, on account of giffgaff’s admissions of liability and its agreement to enter into a settlement.

During the course of this investigation, Ofcom also became aware that giffgaff had failed to provide accurate information in response to two statutory information requests issued by Ofcom under section 135 of the Act. We have today issued a separate Confirmation Decision under s139A of the Act to giffgaff for its contraventions of requirements to provide information. We have imposed a penalty of £50,000 on giffgaff for these contraventions.

This penalty would have been significantly higher if giffgaff had not identified and proactively made Ofcom aware of the inaccuracies in its responses. It is important that CPs inform Ofcom as soon as possible when they become aware that the information they have provided in response to a statutory information request was inaccurate or incomplete.

Non-confidential versions of these Confirmation Decisions are currently being prepared and will be published shortly.

We have decided there are reasonable grounds for believing giffgaff has contravened its obligations under section 135 of the Communications Act 2003 (the ‘Act’) as a result of providing inaccurate information in response to two information requests sent during the course of our investigation.

We have issued a provisional notification under section 138 of the Act to giffgaff setting out our reasons for this. giffgaff now has an opportunity to make representations to us on our provisional decision, which we will take into account before we issue a final decision.

Following consideration of information provided by giffgaff to Ofcom, Ofcom has decided to open an investigation into giffgaff’s compliance with GC 11. GC 11 places obligations upon all CPs to, amongst other things, ensure that every amount stated in a bill is accurate.

GC 11.1 states that:

“The Communications Provider shall not render any Bill to an End-User in respect of the provision of any Public Electronic Communications Services unless every amount stated in that Bill represents and does not exceed the true extent of any such service actually provided to the End-User in question.”

giffgaff has provided information indicating that it may have rendered bills that were inaccurate as a result of a billing error that arose from June 2016. Ofcom has therefore decided to open an investigation that will examine whether there are reasonable grounds to believe giffgaff has failed to comply with its obligations under GC 11.

We are aiming to complete our evidence gathering phase in this investigation by the end of November. We will publish a further update on next steps once that phase is complete.