Protecting citizen-consumers from mis-selling of fixed-line telecoms services

Summary

Background

1.1 ‘Ofcom (the Office of Communications)' exists to further the interest of citizen-consumers through a regulatory regime which, where appropriate, encourages competition. Effective competition delivers choice and lower prices to consumers as well as opportunities for new services and providers. However, consumers may need protection from adverse consequences of competition if they arise.

1.2 This statement sets out Ofcom's conclusions on whether the current safeguards designed to protect consumers from mis-selling of fixed-line telecoms services are effective, or whether it is appropriate for Ofcom to secure new enforcement powers. This follows on from Ofcom's consultation, Protecting citizen-consumers from mis-selling of fixed-line telecoms services , published in April 2004, which put forward two options for consideration:

• consumers are adequately protected, and there is no need to make any changes; and
• consumers are not adequately protected, and there is a need for further regulation by making the current guidelines on sales and marketing codes of practice mandatory.

1.3 The consultation incorporated a regulatory impact assessment. On the basis of information and evidence received during the consultation, Ofcom considers that the balance of arguments, together with the risk to consumers should a serious problem arise, supports the decision that the current consumer safeguards do not provide satisfactory consumer protection against mis-selling of fixed-line telecoms services.

1.4 Ofcom therefore considers that there should be a requirement upon Communications Providers (‘Providers') who engage in sales and marketing activity for fixed-line telecoms services to establish codes of practice on sales and marketing in accordance with published guidelines, and to comply with the provisions of those codes. This measure would ensure that codes of practice for sales and marketing are enforceable, and Ofcom would have the power to take enforcement action against those providers who breach the provisions of their code, including ultimately imposing a financial penalty on the relevant Provider.

1.5 Ofcom is also proposing that the obligation should be subject to a ‘sunset' clause, such that it would lapse two years after the date of introduction unless a positive need were demonstrated to reinstate the obligation. Ofcom considers that such a period would cover the period where most problems are likely to occur as Carrier-Pre Selection (‘CPS') and Wholesale Line Rental (‘WLR') continue to be rolled out.

1.6 In deciding upon the relevant guidelines to be adopted, Ofcom has opted to follow the current industry guidelines on sales and marketing, which we are proposing to update in light of issues emerging from the consultation, and to reflect the proposed modified status of these guidelines.

1.7 Ofcom is also proposing that Providers' codes of practice for sales and marketing be provided on request, and free of charge, to customers. This reflects the current obligation for codes of practice for complaints set out in General Condition 14.1, and is proposed to ensure customer awareness of Providers' codes.

1.8 In reaching its proposed conclusions set out in this statement, Ofcom has considered, and acted in accordance with, its principal duty in section 3, as well as the six community requirements in section 4, of the Communications Act 2003.

1.9 Ofcom's detailed analysis in respect of this proposed decision, including supporting information and evidence, is set out in this statement.

Consultation

1.10 Ofcom is inviting written views and comments by 5pm on Friday 7 January 2005 , on the Notification and proposed modifications to General Condition 14 on on Codes of Practice and Dispute Resolution, attached at Annex 3, which set out:

• the obligation to e stablish, under set guidelines, codes of practice on sales and marketing, and to comply with the provisions of those codes;
• the relevant period of such an obligation;
• the guidelines for sales and marketing codes of practice for fixed-line telecoms services; and
• the obligation to provide codes of practice on sales and marketing on request, and free of charge, to customers.

1.11 Details of how to respond on each of these issues can be found in section 6.

1.12 Ofcom will give careful consideration to all comments received during the consultation period, and in light of the comments received may give effect to the proposals set out in this document, with or without modification, by publication of a Notification and explanatory statement. Ofcom expects to publish the Notification and explanatory statement early in 2005.

Effective date

1.13 Subject to the outcome of the consultation, Ofcom proposes that the requirement upon Providers who engage in sales and marketing for fixed-line telecoms services to establish, under set guidelines, codes of practice on sales and marketing, and to comply with the provisions of those codes, will take effect one month from the date of publication of the Notification and explanatory statement.

The full document is available below.