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Standing Committee Debates

Draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2006

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Fifth Standing Committee
on Delegated Legislation

The Committee consisted of the following Members:


Mr. Eric Forth

†Berry, Roger (Kingswood) (Lab)
†Blunt, Mr. Crispin (Reigate) (Con)
†Burt, Lorely (Solihull) (LD)
Davey, Mr. Edward (Kingston and Surbiton) (LD)
†Dhanda, Mr. Parmjit (Gloucester) (Lab)
†Hendry, Charles (Wealden) (Con)
Holloway, Mr. Adam (Gravesham) (Con)
†MacDougall, Mr. John (Glenrothes) (Lab)
†McIsaac, Shona (Cleethorpes) (Lab)
†Michael, Alun (Minister for Industry and the Regions)
†Mole, Chris (Ipswich) (Lab)
†Moon, Mrs. Madeleine (Bridgend) (Lab)
†Mudie, Mr. George (Leeds, East) (Lab)
†Reed, Mr. Jamie (Copeland) (Lab)
†Short, Clare (Birmingham, Ladywood) (Lab)
Streeter, Mr. Gary (South-West Devon) (Con)
Viggers, Peter (Gosport) (Con)
Geoffrey Farrar, Committee Clerk
† attended the Committee

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Tuesday 28 March 2006

[Mr. Eric Forth in the Chair]

Draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2006

10.30 am

The Minister for Industry and the Regions (Alun Michael): I beg to move,

    That the Committee has considered the draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2006.

It is a pleasure to sit under your kindly and generous chairmanship, Mr. Forth. I can give evidence regarding both those traits. I apologise for arriving at speed.

The purpose of the draft order is straightforward: it is designed to strengthen the regulatory regime to stop those who persistently misuse electronic communications networks or services, including those who make nuisance silent calls to consumers. In research published in June 2005, Brookmead Consulting discovered that on average about six silent calls a month were made to every consumer in the UK and that some consumers received two to three silent calls per day. Brookmead was commissioned by the Direct Marketing Association, which is the body for the direct marketing industry.

Misuse, which is defined in the Communications Act 2003, arises when a person uses an electronic communications network or service and the effect or likely effect of its use is to cause another person unnecessarily to suffer annoyance, inconvenience or anxiety. I have seen for myself—as, I am sure, have other hon. Members—the misery that such behaviour can cause to elderly or confused people. We therefore need to stop it.

As well as silent calls, this type of behaviour includes the misuse of automated calling systems, number scanning, the misuse of the calling line identification facility, misuse for dishonest gain and the misuse of allocated telephone numbers. The aim of the draft order is to ensure that consumers are adequately protected from all those types of behaviour, but there is a particular focus on silent calls.

The draft order raises the maximum penalty that the Office of Communications—Ofcom—can impose on those who persistently misuse electronic communications networks or services, which includes making nuisance silent calls, from £5,000 to £50,000. Silent calls are usually made by marketing companies that use a computerised calling device that dials a telephone number and automatically transfers the call to an available sales agent. If an agent is unavailable to take the call, it is abandoned by the dialler on answer
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and the recipient receives a silent call. Silent calls may also be generated by organisations in the financial services sector, market research calls and companies engaged in number-scanning activities, because they dial a sequence of telephone numbers to find out which ones are in service, the results of which are used to develop a clean list of numbers that have commercial value.

Clare Short (Birmingham, Ladywood) (Lab): I have been highly irritated by such calls being made to my mother. Most people do not know that silent calls to any number can be blocked; that should be publicised more. I have here an e-mail from David Hickson, which I presume that other members of the Committee have received. He says that a higher fine will not work because people do not know who is calling, and that there should be a duty to provide a mechanism that ensures that when someone silently calls, even if there is no person at the other end, the name of the organisation that the call is from is stated. That seems to make a lot of sense.

Alun Michael: My right hon. Friend is right; that is not the subject of the order, but I shall discuss that type of mechanism, which can make a difference. Like her, I have had the experience of seeing my mother affected and disturbed by such calls. I think that of all of us have had similar experiences.

The answer requires more than one step. We are dealing today with the step that would increase the penalties. The order will mean that behind the improvements put in place within the industry will be the threat of financial penalties of considerable significance if the organisations concerned do not observe industry standards and regulations made by the regulator. Until now, the fine has been £5,000. The order will increase it to £50,000.

Clare Short: The logic of the argument sent to all of us is that Ofcom is not using its powers and that therefore, simply increasing the fine will not be effective. If people do not know what organisation is causing the distress, no one will be fined anyway. What is the point of increasing the fines if that will not solve the problem?

Alun Michael: That was exactly the point that I put to Ofcom in our first discussion. I shall come to the history, which is quite important and will help to explain the context.

We have considered the nuisance and tried to bring into place a number of things that would work together through the powers of the regulator and the Government in the order. I have seen the e-mail to which my right hon. Friend refers, and I think that it misses the point. I shall explain, and I shall be happy to give way again if she is still not satisfied.

My right hon. Friend pointed to the question of the level. We need to be sure that the penalty is proportionate. Ofcom commissioned research that showed that 63 per cent. of adults were concerned about silent calls, with 35 per cent. saying that they were very concerned. People aged over 65, to reflect
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her point, expressed more concern, with 63 per cent. saying that they were very concerned. By contrast, 24 per cent. of 15 to 24-year-olds said that they were very concerned. Silent calls are also likely to cause more distress among women, at 38 per cent., than among men, at 33 per cent. I hope that all Members will agree that in view of the number of silent calls received by consumers, we need to take effective and decisive action.

Last summer, Ofcom asked us to consider raising the maximum penalty from £5,000 to £50,000. In arguing for the power to levy a higher penalty on those who persistently misuse networks and services, including those who make nuisance silent calls, Ofcom said that the current maximum penalty was not sufficient for the level of consumer harm and worry caused by those calls. Ofcom also argued that the maximum penalty of £5,000 was not a real sanction or effective deterrent.

In considering Ofcom’s view, to which I was immediately sympathetic, I looked at the history, which shows that when the 2003 Act came into force, silent calls were not a significant issue. Only in the past two years has the problem burst into prominence. The original penalties were simply not designed to tackle silent calls. Their main target was malicious calls from individuals, such as calls in a row between neighbours or the activities of pranksters. I was surprised to discover the obsessive activities of people involved with hunting and other single-issue groups that apparently saw making silent or not-so-silent calls as a legitimate way to press their point of view.

The difference now is the recent growth in the number of silent calls caused by commercial activity. It is right to revisit the maximum penalty level. Rather than individuals, large corporations with very large sums of money and considerable commercial activity could now receive the penalties.

Charles Hendry (Wealden) (Con): I am grateful to the Minister for setting out some of the background. For the sake of clarity, can he tell us how many individuals or organisations have been fined the maximum £5,000 for any reason?

Alun Michael: None have. That was the first question that I asked Ofcom, as I said when I responded to my right hon. Friend the Member for Birmingham, Ladywood (Clare Short) a few minutes ago. The reason is that in relation to the commercial activities taking place, £5,000 is not a major penalty. On each occasion when a breach has occurred, Ofcom has undertaken an investigation and then placed requirements on the companies. There is considerable evidence that those requirements have been complied with. Ofcom has therefore not had to impose a fine. However, the problem remains; we are still getting a high level of silent calls, which is why we want to take the further step, in conjunction with Ofcom’s activities which I shall mention in a moment, of making possible a higher level of penalty to ensure that the measure is proportionate and effective.

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Chris Mole (Ipswich) (Lab): I welcome the efforts to reduce the number of silent calls through the mechanism that we are discussing. To what extent will it address the problem, given the difficulty in tackling silent calls that originate outside the UK?

Alun Michael: Clearly, there is a greater difficulty with calls that originate outside the UK—they are technically very difficult to deal with. If we can deal with those that come from within the UK or on behalf of UK companies—the requirement falls also on calls that come from outside the UK but on behalf of UK companies—we shall make a considerable impact. That is where there are commercial benefits to be derived. So by regulating the industry we can have an impact.

Perhaps I should make the point—Members’ questions have led me into this territory—that on 1 March, new Ofcom rules were introduced. Accountability for information and the recording of information are now part of the context, so from 6 April, which is when the increased fines will come into place, all the different bits of the equation will be in place to pressure the industry to back up the discussion that it has already had in order to drive out silent calls.

I know from discussions with Ofcom, which is accountable to Parliament rather than to Ministers for its regulatory work, that it is as determined as we are to see a successful outcome, and has been working on the matter for some time. As I have indicated, I agreed to Ofcom’s request to increase the maximum penalty to £50,000, and on 31 October 2005, the Department of Trade and Industry launched a consultation, as we are obliged to do. The provisions in the order that we are discussing were subject to that public consultation which closed on 24 January. There was overwhelming support for raising the maximum penalty and so we are proceeding with the order to implement that increase.

Let us turn to the context in which those penalties might be applied. One of Ofcom’s principal duties is to further consumer interests. Under the 2003 Act, Ofcom can take enforcement action when it has reasonable grounds for believing that somebody is engaged in persistent nuisance. Ofcom does that by issuing a notification allowing a period for representations. In practice, Ofcom also requires specific measures to resolve a problem and/or to improve the performance of the company concerned. If those changes are not delivered within a specified time frame, Ofcom can impose financial penalties. The higher penalty of £50,000 will act as a more substantial deterrent or encouragement to the industry to co-operate in moving quickly in the future, while also proving a more appropriate sanction for those who inflict such widespread consumer harm and nuisance.

Our legal advice is that a fine can be imposed for each event rather than for each service provided. So the potential impact for pernicious and persistent exploitation of the system could lead to a much higher burden of penalties. I want those who are tempted to exploit the public through the system to know that heavy penalties are possible and that Ofcom will use
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them if necessary. Having said that, I have been assured by Ofcom that it will consider all cases on a case-by-case basis, taking a firm but flexible approach that takes account of all mitigating circumstances.

Ofcom will also monitor and evaluate on a regular basis how the increased maximum penalty is working and will assess whether consumers are benefiting. That seems to me to strike the right balance. We do not want to constrain legitimate activity, but we do want to ensure that nuisance activity is nipped in the bud quickly. I am sure that the message from both sides of the Committee will be for Ofcom to use its new powers as flexibly as possible to tackle the problem of silent calls. The maximum penalty could be increased further through a similar process, but I am persuaded that that is unlikely to be necessary.

One reason why it will have that impact is that the measure does not come alone. To give consumers additional protection from silent calls, Ofcom introduced new measures for the use of automatic calling systems on 1 March. The new measures need the following key requirements to be observed: a pre-recorded message must be provided for all abandoned calls; calling line identification—that gives the recipient the number of the caller—must be provided for all calls made; unless a dedicated agent is available, numbers subject to an abandoned call must not be redialled for at least 72 hours; and abandoned call rates must be kept below 3 per cent. of total calls for any 24-hour period. I have discussed the way in which Ofcom monitors the system with the nine organisations that it investigated and on which it has imposed the requirements. Ofcom inspects the raw data from those organisations to ensure that they comply with its requirements.

A regulatory impact assessment was carried out, and the results have been published with the Government’s response to the consultation. That assessment concluded that the order introduces no additional regulatory burden for legitimate businesses.

The order is designed to strengthen the powers of Ofcom, allowing it to provide better protection to consumers from nuisance silent calls. We are confident that the increased maximum penalty of £50,000 combined with Ofcom’s new measures will act as a substantial deterrent to those people who make nuisance silent calls.

Mr. John MacDougall (Glenrothes) (Lab): Like my colleagues, I welcome the increase to the fines. The difficulty lies in the looseness of the interpretation. For example, how is persistent defined—one call, two calls? If 100 people make one, two or three calls each, it would be a considerable nuisance to the recipient. Does the Minister agree that attention should be paid to how the content of the order is interpreted?

Alun Michael: Attention has been paid to interpretation. In fact, I discussed it with a representative of Ofcom last week because I wanted to be clear about the interpretation that it would use.
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Essentially, three calls is persistent calling. As the fine is set per event rather than per service, three calls followed by another three calls amounts to two events, and such action would soon result in the maximum £50,000 fine. Therefore, my hon. Friend can be satisfied that fines for persistent calling, as it has been interpreted, would be onerous for any company that disregarded the Ofcom requirements and the higher penalties provided for by the order. I take entirely my hon. Friend’s point. Of course, interpretation has not been included in the statutory instrument, which deals with the levels of fines only. However, I am happy to reassure my hon. Friend about the nature of the interpretation, which I am satisfied is strict.

Clare Short rose—

The Chairman: Order. Before I call the right hon. Lady, the Minister has just reminded the Committee—as I was on the verge of doing—that we must be careful. I am prepared to be reasonably relaxed, but we are not discussing the substance of the statute. We are here to discuss only the level of the fine. I am prepared to accept some dialogue about context but I ask the Committee not to stray too widely. We are not revisiting the substance of the main issue.

Clare Short: I will abide by your request, Mr. Forth, but the point is, unless there is some way for people to know who is making the nuisance calls, will the fine achieve its objective effectively? The Minister said that there would be requirements for firms to have pre-recorded messages and number recognition to tell people who they are. How will that be implemented? Will they be blanket requirements? In future, will all companies that make silent calls be obliged to comply with those requirements or will they be enforced only when Ofcom makes a ruling in an individual case? If so, how will Ofcom know which company made the silent calls?

Alun Michael: I am happy to respond to those questions. Essentially, the requirement will be placed on industry as a whole, so it will be for all the companies. If that was disregarded and identification was withheld, Ofcom could obtain information from BT on the caller’s identity, because that information is held on the BT switches and Ofcom has powers to require BT to provide the information. That applies to BT’s overseas call centres, too.

It is relevant to the increase that we are discussing, which is from £5,000 to £50,000, that in discussing the issues with Ofcom I sought to be sure that it would actively pursue the wider context of the requirements that it could put in place, because I was certain that that was what members of the Committee would want. The level of the fine stands behind the gamut of the statute and the powers given to Ofcom. I was given every assurance that Ofcom would intervene vigorously. It expected to enforce the new rules that it put in place, which were put in place only earlier this month. It expected to use the fine levels, should that be necessary, and to impose fines per incident were there to be the aggravated incidents that would give rise to
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that being justified. Within that context, Ofcom intends to be proportionate in dealing with issues. I point out that on the two occasions on which it has carried out investigations—the first involved seven companies; the second involved two—there has been subsequent compliance.

Let us hope that providing for the increased penalty is a success. It will be if we find that silent calls virtually cease without the necessity of imposing fines. Having said that, the fines will be used if necessary. The level is important. It is important to ensure that both the higher fine level and multiples of it are there, along with the other elements that Ofcom has put in place, to guarantee compliance. I hope that the Committee supports that approach and will join me in encouraging Ofcom to use the powers available to it in enforcing the rules that it has laid down. I commend the order to the Committee.

10.52 am

Charles Hendry: It is a great privilege and pleasure to serve under your chairmanship for the first time, Mr. Forth. We saw a hint of tolerance and generosity at the beginning of the debate when you allowed a slight laxity of time that perhaps was unexpected to us. We have also seen that you are not prepared to allow us to stray far from the issues before us and we understand that.

I am grateful to the Minister for setting out the background to the order and the reasons for increasing the fines from £5,000 to £50,000. In general, he has made a compelling case and we support it, because we recognise that the nuisance calls that are experienced today are extremely different from what was originally envisaged. Indeed, it would have been impossible to envisage the nature of those calls when the initial fines were put in place. We also support the tighter guidelines being issued by Ofcom. That is important. Those guidelines alone will mean a significantly enhanced peace of mind for people who find nuisance calls, and silent calls in particular, a source of great anxiety and a great nuisance.

Understandably, much of the discussion so far has crystallised around nuisance calls. As we all know from our constituents and from other anecdotal evidence, such calls are becoming an increasing daily nuisance for many consumers, and we recognise that action must be taken. We also know about the international experience. For example, in the United States—which you will be extremely familiar with, Mr. Forth—consumers receive four times as many unwanted calls as UK consumers. Given the international nature of many of the organisations behind those telephone calls, we have to recognise that that is the direction in which things will go in the United Kingdom. This is a big issue for the public. The media report much higher viewer feedback whenever it is raised.

As the Minister said, in 2005 the Direct Marketing Association commissioned research on the issues through the Brookmead report. That report identified that although most consumers said that unwanted
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calls caused them unacceptable inconvenience, 20 per cent. said that they became anxious when they received a silent call, and that figure increased to 40 per cent. among younger women. As we have also heard, the matter is of particular concern for older people as well. Most people felt that the number of unwelcome calls that they were receiving was increasing.

In 1997, the Direct Marketing Association established the telephone preference service, which was placed on a statutory footing in 1999. It was designed for consumers to register their numbers to prevent companies from calling them for the purposes of telemarketing. As canvassers, we know that that is often deeply unhelpful when we are trying to contact people in the run-up to elections, but we also recognise that it is very important for people to be able to guarantee their privacy in that way.

Given the annoyance of unwanted calls, it is no wonder that more than 12 million people have registered their numbers with the telephone preference service. That is an astonishing amount considering that the availability of the scheme has not had much publicity and it shows that people are increasingly angered by nuisance calls. We know that 100,000 complaints about nuisance calls have been made through the Direct Marketing Association since 1999, but as the Minister said earlier, there have been no prosecutions and no fines.

The Minister set out the types of case that the £5,000 fine was designed to deal with. Even though we can understand that things have moved on in terms of complexity, it has never been used for the original purposes. No one has been fined £5,000 even under the original terms of the sort of nuisance activity that might be carried out. It is astonishing that 100,000 complaints have been made but there has not been one prosecution or fine.

Yet we are told today that the operation can work only if that punishment, which has never been used, is increased tenfold to £50,000.

Alun Michael: I did not say that it would only work if the fine penalty were increased tenfold; what I said was that Ofcom felt that there should be an increase and we agreed, because it would indicate the seriousness, and the likely penalty, should somebody disregard Ofcom’s requirements. I am sure the hon. Gentleman would accept that there should not be fines when organisations have complied with Ofcom’s requirements, which is what has happened until now.

Charles Hendry: I understand that distinction, but my point is that a maximum fine has been in place for a number of years but it has never been used. We must recognise that the system is flawed, which is one reason why we need to address it. We should not hide from that fact in any case.

The Minister yesterday answered my parliamentary question about the nature and the number of investigations that had been carried out by the Information Commissioner who received and dealt with just 96 complaints in the fourth quarter of 2005. Let us put that in perspective. Over those three
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months, British Telecom will have received approximately 500,000 complaints—it gets 150,00 to 200,000 complaints a month and the Direct Marketing Association and other complaints bureaux will have received a further 15,000 complaints, but the Information Commissioner has looked into just 96 of them. That is something that does not add up. There must be greater activity on the problem because at the moment the public are not being protected against what they see as a growing nuisance. The Information Commissioner must take further action against those who abuse the rules.

Alun Michael: I am not sure about the hon. Gentleman’s reference, because the Information Commissioner does not regulate calls.

The Chairman: Order. As I feared, we are beginning to stray from the proposal, which is very limited and very restricted. I am prepared to allow hon. Members to put matters in context but I am not prepared to allow the further exploration or revisiting of extraneous issues. I hope that the Committee will bear that in mind.

Charles Hendry: I accept your advice, Mr. Forth. I will correspond with the Minister to put my parliamentary question and his answer in the context of the debate.

The Minister admitted in answer to another parliamentary question that there is no measurement of the number of complaints against individual companies, so we cannot have the information that would enable us to identify the major offenders who should be fined. I asked how many companies had had more than 50 complaints made against them and I was told that that information is not collected. Of the many complaints that are made, we have no idea—and neither, apparently, do any of the organisations involved in monitoring this—whether they concern single offenders, three-time offenders, the occasional hunt leader who decides to call a Minister in the middle of the night, or a persistent offender who has caused thousands of complaints. Until that issue is addressed and a system is in place, we will not be able to provide sufficient security and assurance to the public.

We need more information from the Minister about why the existing measures have not been used more. Why have there been no prosecutions under the initial terms and guidance of the Act? What constitutes a misuse is clear. The explanatory memorandum states:

    “A person misuses an electronic communications network or service if the effect or likely effect of his use of it is to cause another unnecessarily to suffer annoyance, inconvenience or anxiety, or he uses the network or service to engage in conduct which has or is likely to have the effect of causing another person such annoyance, inconvenience or anxiety.”

It is extremely clear what that covers, so why have the existing powers not been used?

What is the basis for the £50,000 fine amount? Did the Minister go back to Ofcom and ask, “Why not £100,000 or £500,000”? Why did he settle on £50,000?
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We accept the need to increase it, but the Minister needs to explain to the Committee the reason for the failure to use the existing powers.

11.1 am

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