01 November 2016

Ofcom fines Vodafone £4.6m for regulatory breaches

This article was written by Natalia Porto

The General Conditions of Entitlement establish the main regulatory framework for communications providers in the UK. Breaches of the General Conditions may be enforced by Ofcom with penalties of up to 10% of the communications provider's relevant turnover.

Vodafone’s breaches of the General Conditions were a consequence of issues arising from the transfer of Vodafone's pay-as-you-go customers to a new billing system. Such issues resulted in Vodafone failing to complete the disconnection of inactive SIM cards, leaving customers in a pre-disconnection state for 17 months. During this period, customers were able to top up their accounts even though no services were being provided to them. Vodafone also failed to credit customers' accounts with the amounts they paid for and to reflect such credits in the customers’ billing information. In addition, Vodafone failed to monitor such breaches and to deal properly with related customer complaints.

The fines imposed to Vodafone were the result of two own-initiative investigations (more information here and here) carried out by Ofcom in June 2015. In summary, Ofcom concluded that Vodafone breached the following General Conditions:

  • General Condition 11 (Metering and Billing), by giving to its customers account balance information that did not accurately reflect the credits paid for by the customers and the services provided by Vodafone;

  • General Condition 23 (Sales and Marketing of Mobile Telephony Services), by giving customers incorrect information that they would receive services in return for the amounts they paid; and

  • General Condition 14 (Codes of Practice and Dispute Resolution), by failing to have complaints handling procedures in accordance with the Ofcom Approved Code of Practice for Complaints Handling. In particular, by failing to ensure fair and timely resolution of complaints with clearly established timeframes and to issue a written notification to customers with information on their right to resort to free alternative dispute resolution schemes.

The fines for breaches of the General Conditions reflect a reduction in 7% of the original amount, due to the fact that Vodafone entered into a formal settlement with Ofcom. The settlement included Vodafone’s agreement to reimburse its customers and donate £100k to charity.

The combined penalties resulted in the highest fine ever imposed to a UK telecoms provider by Ofcom and all communications providers in the UK should pay heed to this decision. Ofcom revised its penalty guidelines in December 2015 in order to ensure that its penalties would provide an appropriate deterrence for the industry.

The facts of this case also highlight the need to ensure that systems upgrades and technology transformation projects are carried out by communications providers in such a way to ensure that their services can continue unaffected. Measures should be taken to ensure that robust contracts are in place with vendors, appropriate systems integration and testing is undertaken before new systems are launched and business continuity plans are in place to ensure that end users are not impacted if things go wrong.

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