Ofcom welcomes new code on mis-selling in mobile market

Ofcom has welcomed a new industry code of practice for mobile phone providers that aims to stamp out misleading sales and marketing practices in the mobile market. Ofcom warned, however, that formal intervention would soon follow should the industry initiative fail.

With more than 66 million active customer accounts, the UK mobile telephone industry is a mature and competitive market. Five mobile network operators (MNOs) compete for market share among themselves and, increasingly, with new mobile virtual network operators.

Competition brings benefits for consumers, such as lower prices and a greater range of services. However, it is important that those selling mobile services do not overstep the mark and seek to confuse or mislead consumers.

Unfortunately, there is growing evidence that a few are doing just that. Ofcom is currently receiving in the region of 400 complaints per month, a significant increase when compared to the number of complaints received at the end of 2006.

Ofcom is concerned about a significant increase in complaints since the beginning of the year relating to mis-selling of mobile phone services, involving mobile phone retailers either acting, or claiming to act, on behalf of MNOs.

Ofcom has discussed the nature of these complaints with MNOs directly and industry has responded with a code of practice which defines the best approach to promoting and selling mobile services.

The code of practice, published today by Ofcom, sets out:

minimum business standards, including prohibited sales and marketing practices;

how retailers must comply, including details of proactive monitoring by MNOs and possible sanctions;

due-diligence exercises to determine which retailers should be engaged; and

how complaints to MNOs should be monitored and handled.

Ofcom expects to see a significant reduction in the number of mis-selling complaints in the coming weeks as a result of this initiative. If it does not, it will move swiftly to assess more formal regulatory options to protect consumers.

“Competition in the mobile market has led to lower prices and a wide variety of valuable and exciting new services,” said Ed Richards, Ofcom Chief Executive.

“However, consumers must trust those that sell to them. We expect this new voluntary code of practice to stamp out mis-selling in mobile; if it does not, we will not hesitate to step in to protect consumers.”

Citizens Advice social policy officer Tony Herbert said: “This voluntary code, while long overdue, is a move in the right direction. But if it doesn't bring an end to these problems quickly, then Ofcom should use their full powers to take decisive regulatory action.

“The number of mobile phone problems seen by Citizens Advice Bureaux increased by 84% in the nine months from April to December last year to around 6,000 in total.

“Many of the cases reported by bureaux involve people being browbeaten into accepting a new mobile phone, being sent a phone against their express wishes, or being hoodwinked into agreeing to a new mobile phone contract believing that an unsolicited call offering them a better deal on their mobile phone is from their current mobile provider, when in fact this is not the case. These sales tactics are not only unfair and misleading, but can also result in the customer concerned being pushed into debt through no fault of their own.”