Draft Communications Act 2003
(Maximum Penalty for Persistent
Misuse of Network or Service)
Order 2010

The Committee consisted of the following Members:

Chair: † Annette Brooke 

† Brennan, Kevin (Cardiff West) (Lab) 

† Burt, Lorely (Solihull) (LD) 

† Cooper, Rosie (West Lancashire) (Lab) 

Corbyn, Jeremy (Islington North) (Lab) 

† Jones, Graham (Hyndburn) (Lab) 

† Latham, Pauline (Mid Derbyshire) (Con) 

† Leadsom, Andrea (South Northamptonshire) (Con) 

† Lee, Jessica (Erewash) (Con) 

† Lee, Dr Phillip (Bracknell) (Con) 

† Leslie, Chris (Nottingham East) (Lab/Co-op) 

† Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury)  

† Rees-Mogg, Jacob (North East Somerset) (Con) 

Sheerman, Mr Barry (Huddersfield) (Lab/Co-op) 

† Simpson, David (Upper Bann) (DUP) 

† Swinson, Jo (East Dunbartonshire) (LD) 

† Tami, Mark (Alyn and Deeside) (Lab) 

† Vaizey, Mr Edward (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

† Walker, Mr Robin (Worcester) (Con) 

Glenn McKee, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee 

Monday 13 September 2010  

[Annette Brooke in the Chair] 

Draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010 

4.30 pm 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey):  I beg to move, 

That the Committee has considered the draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010. 

It is a great honour to serve under your chairmanship this afternoon, Ms Brooke. The purpose of the order is simple. It is designed to strengthen consumer protection and the regulatory system to more fully deter those who persistently misuse electronic communications networks or electronic communications services, including those who make silent and abandoned calls to consumers. The order was debated in the other place at the end of July and was supported by all three parties. 

According to the definition under the Communications Act 2003, persistent misuse occurs when someone uses an electronic communications network or service in such a way that the effect or likely effect is to cause another person unnecessarily to suffer annoyance, inconvenience or anxiety. I am sure that members of the Committee will be only too aware of constituents who suffer from silent and abandoned calls and that they therefore agree that we need to do something to ensure that consumers are effectively protected. The calls are particularly concerning to vulnerable people and the elderly. 

Although our primary focus is on silent and abandoned calls, there is a range of other forms of persistent misuse and the proposed increased penalty will apply equally to all those, too. Other forms include the misuse of automated calling systems, number scanning, withholding calling line identification facilities, using systems for dishonest gain and misusing allocated telephone numbers. To ensure that consumers are better protected from persistent misuse, particularly in relation to silent and abandoned calls, the order proposes to increase the maximum that Ofcom can impose for such misuse from £50,000 to £2 million. The fines were increased from £5,000 to £50,000 as recently as 2006. 

In most cases, silent and abandoned calls are usually made by marketing companies, which use a computerised calling system that dials a telephone number and automatically transfers the call to an available sales operator whenever a call is answered. However, if no sales operator is available, the line is disconnected, which results in the recipient receiving an abandoned call. If a recorded information message is not played, it becomes a silent call. Hon. Members will no doubt appreciate that such calls are annoying and can cause distress. 

Kevin Brennan (Cardiff West) (Lab):  Will the Minister tell us what he thinks is an acceptable percentage of abandoned and silent calls? 

Mr Vaizey:  I cannot tell the hon. Gentleman what I think would be an acceptable number of abandoned calls, but Ofcom has a code that it agrees with the industry. It is in constant discussion with the industry about what is or is not an acceptable number of silent calls. In the case of Barclaycard, when thousands of silent calls were made, there was a clear breach. 

Kevin Brennan:  I am sure that the Minister is aware that the Ofcom accepted percentage for such calls is 3% of those made and that that can generate millions of silent and abandoned calls each year. Does he consider that an acceptable guideline for the industry? 

Mr Vaizey:  I am happy to accept that it is an acceptable guideline for the industry. 

Such calls might also be generated by other sector groups such as market research, financial services and so forth. They can also be the result of firms engaged in number scanning activities that call a sequence of numbers to determine those that are in service. The intention is usually to develop clean lists of telephone numbers that have commercial value. 

Research conducted by Ofcom between December 2000 and March 2010 highlighted that almost three quarters of respondents felt that they had been very or fairly inconvenienced by silent calls. In the three months to June this year, more than 5,000 concerned consumers contacted BT’s nuisance calls bureau, which provides free help and support for consumers in relation to such calls. For the benefit of the Opposition spokesman, let me say that the bureau’s number is 0800 661 441. Hon. Members might wish to record that number and communicate it to their constituents. 

Chris Leslie (Nottingham East) (Lab/Co-op):  Last week, a constituent of mine reported that he had received persistent random calls during the night and then a call, which he thought was from an Indian call centre, purporting to sell a £20 product that would stop late-night phone calls—a form of blackmail. He did not know whether to report it to the police or to the nuisance hotline. Should he have done the latter, or should he have taken it into a more criminal context? 

Mr Vaizey:  My advice to the hon. Gentleman’s constituent would be to call the BT nuisance calls bureau, but he could also contact Ofcom. He probably took the best course of action by contacting his effective constituency MP, to raise the issue at the highest level. 

The hon. Member’s constituent is one of thousands of consumers who have been plagued by this nuisance. In the first half of this year, Ofcom received just fewer than 2,500 complaints about silent calls and about 6,000 last year. Last month, a survey on cold calling by Which? magazine found that a third of some 2,000 consumers had received silent calls. In the previous Parliament, 64 Members signed an early-day motion to highlight their concern about the nuisance. There is, therefore, a requirement for us to take effective action, to ensure that consumers are adequately protected. 

Last year, Ofcom asked the then Government to consider raising the maximum penalty for persistent misuse from £50,000 to £2 million, because it felt that the penalty did not serve as a proper sanction or an effective deterrent to those who deliberately and persistently made silent and abandoned calls to consumers. In 2008, Ofcom considered a serious case in which Barclaycard was found to have made an extremely large number of silent calls over an eight-month period. Ofcom felt that it was hampered in that it was able to issue only a £50,000 maximum penalty. Since then, it has taken informal action against 22 companies. 

Ofcom has other penalty powers, including turnover-based broadcasting powers, which it used effectively in relation to the 2007 premium rate service phone-in scandal, in which GMTV was fined £2 million. Ofcom’s view is that as there is no actual financial loss, harm can be difficult to quantify in relation to silent calls—picking up the point made by the hon. Member for Nottingham East—but consumers might suffer just as much. In such situations, a £2 million maximum penalty does not seem unreasonable. 

Graham Jones (Hyndburn) (Lab):  Will the Minister be more specific about the effectiveness of the informal actions regarding the 22 companies? 

Mr Vaizey:  I understand that Ofcom considers taking specific action and imposing fines on companies as a last resort, and therefore when companies appear to be in breach of the code, informal contact is always in the interests of both Ofcom and the companies. Such action was taken by Ofcom in those circumstances, and I understand that breaches of the code then desisted. 

A 12-week public consultation on the order was undertaken between October 2009 and January 2010, and 126 out of 137 respondents favoured an increase in the maximum penalty, to £2 million. A further seven respondents favoured an increase of some kind, and only three did not favour any increase. The proposed increased penalty will help to provide a more substantial deterrent to most call centres with up to 400 employees. It is possible that larger call centres might not be fully deterred, but it is likely that the negative media publicity of a £2 million penalty will help to deter even those operations from making silent and abandoned calls. 

Ofcom will work on a case-by-case basis whenever enforcement is necessary, by taking a firm but flexible approach towards anyone who makes silent and abandoned calls or engages in any other form of persistent misuse. Ofcom will continue to monitor complaints and other cases that it receives and will work in close association with the various nuisance call bureaux. That will enable Ofcom to identify trends and patterns in silent and abandoned call rates, as well as the companies that make calls of that nature. Ofcom will use its formal powers to request information and will take strong action, including the use of financial penalties when appropriate. 

One of Ofcom’s main duties requires it to act in the interests of consumers. Under the Communication Act 2003, Ofcom is able to take enforcement action in cases where it has reasonable grounds for believing that an offender has engaged in persistent misuse. Under section 128 of the 2003 Act, Ofcom can issue a financial penalty to an organisation that it notifies, and it can

notify whenever it has sufficient evidence to show that an offending company has failed to act in line with Ofcom’s policy on silent and abandoned calls. In considering the penalty, careful account is taken of the extent of the identified misuse, and the proposed penalty increase will allow Ofcom to issue a more proportionate penalty that more fully fits the seriousness of the offence. 

We believe that the order will ensure that consumers are more fully protected from silent and abandoned calls by implementing an increased and more appropriate penalty, which is more consistent with the harm that such calls cause to many consumers. In addition, the order will help to reduce the need for many consumers to spend money on experimenting to find out whether any commercially available product or service helps to keep silent and abandoned calls at bay. 

I thank members of the Committee for their consideration of the order today. It is intended to strengthen the Ofcom’s powers, to ensure that consumers are more effectively protected from silent and abandoned calls. It is therefore right that we give careful consideration to the issue. I commend the order to the House. 

4.42 pm 

Kevin Brennan:  Thank you, Ms Brooke, for chairing today’s proceedings. It is a great pleasure to serve for the first time under your chairmanship. 

I commend the Government for bringing the order forward. As the Minister knows, it was initiated by the previous Government and therefore he will not be surprised to learn that I will not be asking my hon. Friends to oppose it this afternoon. However, we need to explore a series of issues as well as the way forward following, hopefully, the passage of the order this afternoon. 

The Minister will be aware from the assiduous research that he will have done in preparation for the Committee that, in 2004, when I was on the Back Benches, I introduced a ten-minute Bill on this subject—corporate nuisance telephone calls —and I am sad that we are still discussing that. Although my Bill, owing to the errors of Parliament’s ways, did not make it on to the statute book, it had an impact in generating the kind of debate that led to measures to increase the seriousness of the fines that Ofcom can levy. However, we are still discussing it. It is right to raise the fine to £2 million, and the Government correctly decided to take the measure forward, because a £50,000 fine was simply not enough to deter the really big players in the market. However, the problem clearly persists. The Government need to consider what else can be done in addition to passing the statutory instrument before us this afternoon. 

I am going to make a rather shameful confession. As a small boy—not all of us are entirely without sin when we are younger—I occasionally used to go with some of my friends, knock on people’s doors and run away. In my part of the world, we called that game knockout ginger. 

Mark Tami (Alyn and Deeside) (Lab):  Knock down ginger. 

Kevin Brennan:  I know that it has different names in other parts of the country. Those who had a misspent youth, like my hon. Friend and me, are aware of that game. It is a shameful practice and we were rightly

admonished and punished whenever we were caught. Corporate nuisance calls are the telecoms equivalent of that game. What happens is that companies, operating legally in the United Kingdom, phone up citizens in their homes in the full knowledge that a percentage of those phone calls will result in a nuisance, silent call or an abandoned call leading to a recorded message, rather than to a human being at the other end of the line. That is part of the business model. Unfortunately, the predictive dialling equipment from time to time dials more people than there are live operators available—more calls are answered than was predicted, so a silent call or, more often these days, a call containing a recorded message results. 

Lorely Burt (Solihull) (LD):  I never played knock down ginger, but does the hon. Gentleman not agree that, whatever the misdemeanour, the possibility of getting caught is what most deters a small boy, or an organisation, from taking an illegal action? That is what we should be considering, to ensure that Ofcom not only finds out who is perpetrating the illegal calls, but prosecutes them. 

Kevin Brennan:  In my case, the possibility of being caught was quite strong—indeed, it happened on several occasions. The certainty of a belting from my dad was also a strong possibility in such circumstances. 

The hon. Lady is absolutely right. It is important that, as well as the deterrent being sufficient, companies are put off carrying out the practice because they have the feeling that a fine on that scale might be possible. That is part of the argument that I want to develop about Ofcom’s responsibility in addition to the statutory instrument, which gives it the level of fine that it requested from the Government to deal with the problem. 

I was slightly disappointed when the Minister indicated in his response to my intervention that he felt a 3% failure rate was acceptable. When I introduced my Bill in 2004, the Direct Marketing Association’s industry standard was a 5% rate. That has been reduced. However, in 2004, just one company was found to have breached the regulations—Kitchens Direct. It made 11 million phone calls to households, which meant that under the industry standard current at the time, it could have made 559,999 corporate nuisance phone calls and still been within the industry standard. Even under the current provision it could be making more than 340,000 calls—I leave hon. Members to do the exact maths—without falling foul of the guidelines issued by Ofcom. 

I ask the Minister to reconsider his view that the current 3% figure is defensible. That might have been the case when the issue was first highlighted. However, many years down the line, any tolerance level of such phone calls is less defensible. 

In addition to the increased fines outlined in the statutory instrument, I ask the Minister to engage with Ofcom further—as he said, it has a duty to act in the interests of consumers. Will he undertake to the Committee that he will meet with Ofcom to discuss a sharp tightening of the guidelines on the acceptable number of abandoned calls, with the aim of setting out a timetable to eradicate such calls altogether from our national life? Will he press Ofcom to make more use of the powers it already

has on behalf of consumers, who are fed up with those continual abuses? There are still thousands of complaints about the problem. I am sure that colleagues have had complaints from constituents about the practice—I certainly have had many. Finally, will he report back to the House, before it rises for the Christmas recess, on his talks with Ofcom, so that we can hear how we are progressing on the issue? 

I welcome the Government’s decision to support the statutory instrument. Some pressure needs to be applied alongside it, however, to sensitive places at Ofcom to ensure a general movement—in addition to the additional deterrents—towards reducing what is deemed an acceptable level under the guidance on such calls. 

4.50 pm 

Lorely Burt:  May I welcome you to your new position, Ms Brooke? I know that you will bring wisdom and fairness to all the proceedings over which you will preside. I also say to colleagues who are not as familiar with you as I am that you will keep us all in order, which is to be welcomed. 

I welcome the order. I am a veteran of the Committee that discussed the silent calls SI in 2006, when we raised the penalty from £5,000 to £50,000. Nevertheless, I should like to ask the Minister the same question as I asked then—will it work? I agree that the penalty of £2 million is a much more appropriate level for large organisations, considering the degree of nuisance that they are capable of causing people. It is important, however, that companies are seen to be punished. I urge the Minister to review his statement that Ofcom will use prosecution only as a last resort. The problem is that a gently, gently approach, as the hon. Member for Cardiff West said, has not necessarily worked in relation to eliminating this disturbing and unpleasant practice. 

How many prosecutions has Ofcom made since 2006? If the Minister does not know the answer, will he respond to me in writing? We look forward to the post-implementation review in 2013 and I welcome the fact that the Government are committed to pre and post-implementation reviews of all forms of legislation, because it is important to see whether it works. We pass it in good faith, but it is important to conduct that measurement. Will the Minister include the number of prosecutions, as well as the other factors that he will measure, in the post-implementation review in order to assess whether the statutory instrument works? 

4.53 pm 

Chris Leslie:  I rise only briefly to add to the hon. Lady’s point, which I support. It is incredibly important to publicise not only the hotline details to enable the public to report problems, but the progress of prosecutions and the extent to which they are successful. It reminds me of the New York and Giuliani “broken windows” syndrome and the approach to reporting crimes or activities that could have been dealt with. The whole point of that process was that the cycle was completed by the member of the public who reported an incident actually seeing a response to it. 

Will the Minister set up a website via his Department, Ofcom or BT that allows the public to see the top current abuses? Will he also publicise more radically and proactively how people can deal with and crack

down on complaints—perhaps such information could be included on phone bills—and advise them on what they should do? The public could get one back on the offender by keeping them on the phone for longer and racking up their call time. The public have a deep sense that nothing can be done and that they are just one of millions, so they often do not bother reporting these things. I get the sense that many hon. Members will want a much more proactive approach from the authorities on all sides, to send out a tough message that goes beyond simply increasing the penalty, welcome though that is. 

4.55 pm 

Mr Vaizey:  I thank hon. Members for their extremely valuable contributions. I am not simply going through the motions in saying that; I can reveal, for example, that I had absolutely no idea that the hon. Member for Cardiff West introduced a ten-minute Bill in 2004. My research was pretty assiduous, but it did not throw up that fact. I am delighted that he is so well informed and interested in the issue, because I will happily say that I, as a constituency MP, regard it as one that should be tackled on behalf of all our constituents. 

I would like to address the specific points raised before making some more general remarks. The hon. Member for Cardiff West said that he felt that the 3% failure rate was unacceptable, given that some companies make millions or even tens of millions of phone calls, and 3%, which appears to be a small figure, may turn out to be a very large figure. In response, the 3% is a guideline and Ofcom takes into account other factors in deciding whether to take enforcement action within its guidelines. Those factors include whether the company plays a message, so that where the call is abandoned there is at least a recorded message explaining what has happened; maintains a period of grace of three days before it calls the number again; provides calling line identification, to which I referred earlier, so the consumer knows who has called them by dialling 1471; and maintains a 15-second ringing time to allow the recipient of the call to have the chance to pick up the phone. 

The hon. Gentleman referred to knock down ginger as a corollary of the silent calls, but I would say that canvassing during an election could be a similar example. Perhaps one occasionally does not leave enough time for the constituent to open the door to hear the virtuous policies that one is proposing, and is already halfway down the street when they open that door having got up from the television set in the middle of the Champions League final. It is very important that the guidelines are taken into account. 

The hon. Member for Solihull made a valuable contribution. Again, I confess that my research was not assiduous enough for me to realise that she is now a veteran of this legislation. She has been here once before, she is here again, and, from the tone of her remarks, I suspect that she does not want to be here for a third time, so we had better get it right. My understanding is that since 2006, nine companies have had enforcement action taken against them, and two of them received the maximum fine of £50,000. 

Lorely Burt:  Given all the companies conducting silent calls, does the Minister consider nine prosecutions in that period as being enough to put off organisations from conducting them? 

Mr Vaizey:  Perhaps I might answer that question in a general fashion when I wind up, because I want to take on effectively the points all three hon. Members made about the need for Ofcom to take a more proactive stance. I will not make a value judgment on whether nine companies is an adequate response. As I said earlier, I think, 22 companies have been informally approached, and, obviously, I am not privy to Ofcom’s inner workings and how it is proceeding. It might be a further failure of my research that I have not established in general the number of companies in which Ofcom has taken an interest, even before engaging in formal discussions about their breach of the code. 

The hon. Member for Nottingham East, a former Minister whose return to the House is welcome, asked whether there should not be a website detailing the number of prosecutions and updating consumers on the action being taken by Ofcom. The Ofcom website offers consumers detailed guidance and reporting on how to deal with silent calls, but I think that he was making the wider point that Ofcom should show the frustrated consumer or constituent what it is doing to tackle the problem. I recognise the thrust of his remarks, which is that our constituents are deeply frustrated by having to deal with a range of different problems and might feel that the organisations that are meant to be taking responsibility for those problems are not doing enough. Sometimes that complaint is genuine; sometimes it arises because our constituents do not have access to information reassuring them that action is being taken. 

I am meeting the chief executive of Ofcom tomorrow, and the issue will be on the agenda. I take from this Committee a strong message that, although the increase in fine is welcome, Ofcom must be seen to do more to tackle the issue. I shall discuss with the chief executive what low-cost, light-approach methods might be possible: perhaps, for example, a basic webpage keeping consumers abreast of concerns. As my officials and I were preparing for the Committee this morning, I asked them how we publicise information on where a consumer can take a complaint. I certainly intend to discuss with some phone companies, for example, putting clear messages on phone bills so consumers know where to complain about nuisance calls. As hon. Members will be all too aware, the fact that I have read out the number in the Committee does not, I am afraid, mean that the number will be broadcast to a wider public, apart from a few dedicated viewers of the Parliament channel. 

Kevin Brennan:  I am delighted that the Minister is meeting Ofcom tomorrow. I do not expect him to commit to policy directions on the hoof in Committee, but will he at least undertake to discuss with the chief executive the possibility of tightening the guideline percentage for what is deemed to be an acceptable number of phone calls, and report back to the Committee on the outcome of the discussions? I think that we are all interested to keep the pressure on. 

Mr Vaizey:  Absolutely. I should also have mentioned that Ofcom has undertaken a consultation on its silent calls policy. The consultation concluded at the end of July, and the results should emerge shortly. I will certainly undertake to write to all Committee members after my meeting with the chief executive tomorrow, and I will ensure that I discuss with him not only the policy

guidelines but the wider issues raised by the Committee about publication, enforcement and the general need for Ofcom to deal as effectively as possible with the problem of silent and abandoned calls. 

With those reassurances and my genuine gratitude for hon. Members’ valuable contributions, I commend the order to the Committee. 

Question put and agreed to.  

Resolved,  

That the Committee has considered the draft Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010. 

5.4 pm 

Committee rose.