Ofcom targets mobile phone industry dishonesty

The telecoms regulator, Ofcom, has proposed mandatory new rules to clean up the mobile phone market following a sharp rise in consumer complaints.

The new rules aimed at stamping out misleading sales and marketing tactics would ensure that any operator that continued to engage in dishonest, misleading or deceptive conduct would be in breach of the Communications Act 2003.

Ed Richards, Ofcom chief executive said: "The UK has one of the more competitive mobile phone sectors in the world. But strong competition is no excuse for marketing malpractice.

"We warned the industry last year that unless it cleaned up its act, we would consider introducing new rules. The facts show that this hasn't happened, so we are now proposing tougher measures to protect consumers from unacceptable sales and marketing practices.

"Ofcom's proposals would, if adopted, see the introduction of a General Condition, a legally enforceable rule that requires communications providers to adhere to the Communications Act 2003."

The decision to make the rules binding follows a huge rise in complaints made against mobile phone companies and retailers selling on their behalf over the past six months, despite the introduction of a voluntary code of practice in July 2007.

The regulator is particularly concerned about two practices: customers being given false or inaccurate information when buying a mobile phone contract and cashback promotions that fail to reimburse the consumer.

An Ofcom representative told Computeractive that complaints peaked in the second half of last year when some cashback operators went out of business. It received around 700 complaints per month to January 2008, compared to 460 complaints in July 2007.

According to price comparison site Moneysupermarket, 29 per cent of people who bought into a cashback deal have been unable to recover the full cashback amount.

The proposed changes would put the onus on the mobile phone company to make sure the customer intended, and was authorised, to enter into a contract. They would also have to ensure the customer had received the information he or she needed at the point of sale.

Companies would also have to guarantee that the terms and conditions of cashback deals offered were fair. They would also have to show due diligence and carry out a number of checks in this respect.

Breaching a General Condition can lead to a fine of up to 10 per cent of relevant turnover. Ofcom would also be able to take legal action against an operator if an appointed retailer should mis-sell its products and services.

Rob Barnes, head of broadband and mobiles at Moneysupermarket, condemned Ofcom for moving too slowly but urged consumers to get involved in the public consultation process the regulator has launched.

He said: “When it comes to protecting consumers Ofcom is again doing too little too late. I’d urge anyone with a vested interest in mobile telecommunications, or anyone who has been ripped off, to comment on Ofcom's consultation – it's time Ofcom actually listened to the consumer."

The public consultation runs until 29 April 2008 and Ofcom aims to have the new rules in place by summer 2008.