Business, Innovation and SkillsWritten evidence submitted by UK Competitive Telecommunications Association

1. Introduction

UKCTA is a trade association promoting the interests of competitive fixed-line telecommunications companies competing against BT, as well as each other, in the residential and business markets. Its role is to develop and promote the interests of its members to Ofcom and the Government. Details of membership of UKCTA can be found at www.ukcta.com. UKCTA welcomes the opportunity to respond to this call for evidence since the Bill contains a number of provisions with very serious implications for our members.

Last year UKCTA submitted a response to the BIS consultation document on the implementation of the Consumer Rights Directive. In this response we have confined our comments to three areas of greatest concern to our members:

Certain aspects of the digital content provisions

One clause in the Services Chapter

Some provisions in the Unfair Terms Chapter.

2. Digital Content Provisions

Quality as a matter of custom—s.36 (10)

The first concern which UKCTA has relates to section 36(10) which provides that “A contract to provide digital content may be treated as making provision about the quality of the digital content as a matter of custom.”

UKCTA does not believe that it is appropriate to infer that any provision is made based on custom. One of the key characteristics of the market for digital content is that it is continuously evolving and that the pace of change is rapid. The reference to custom might be appropriate in a more static market but it is not appropriate in relation to the provision of digital content. UKCTA would therefore suggest that sub section 10 ought to be deleted.

Fitness for a particular purpose—Sections 37(1), (3) and (6)

S.37(1)Subsection (3) applies to a contract to provide digital content if before the contract is made the consumer makes known to the trader (expressly or by implication) any particular purpose for which the consumer is contracting for the digital content.

S.37(3)The contract is to be treated as including a term that the digital content is reasonably fit for that purpose, whether or not that is a purpose for which digital content of that kind is usually provided.

S.37(6)A contract to provide digital content may be treated as making provision about the fitness of the digital content for a particular purpose as a matter of custom.

UKCTA has members whose business model involves the immediate delivery to consumers of digital content, namely digital television content. This is something now offered by all the main consumer facing brands on the sector. Our members have significant concerns about these provisions and how they will impact on transactions where consumers receive immediate delivery of content at the point of purchase.

Typically such transactions involve the provision of information as to the nature of the content to consumers in order that they can make a decision as to whether or not to purchase the content. But these subsections listed above would introduce for consumers the opportunity to inform suppliers that they intend to use the digital content for a particular purpose. As currently designed, digital content delivery platforms do not then allow providers the opportunity envisaged in the draft bill to respond as to whether or not the digital content is in fact indeed fit for the consumers’ stated purpose. Worst still the sub sections require the providers to consider whether an express purpose may have been implied by the consumer. In a world where consumers expect, and are given, immediate delivery of digital content, these sub sections are completely out of step and inappropriate.

These concerns apply not only to transactions for TV content involving UKCTA members but perhaps even more significantly (given the volume of transactions involved) to purchases of smart phone apps via providers such as the Apple App Store, Google Play and Amazon.

For example, if a consumer was looking at a smart phone app which was of limited functionality but the consumer emailed the supplier and either expressly or impliedly described a more complex purpose for which they intended to use the app, and then immediately downloaded it, under the drafting currently proposed, that App would be deemed fit for that purpose and if it did not perform to the standard the consumer had stated, he would have a course of action against the supplier. In order to protect against exposure to such risk we imagine that, if implemented as currently drafted, the regulations might force suppliers of digital content to redesign their delivery platforms to mitigate the risks. Such changes would not enhance the consumer’s purchasing experience; we imagine it would be quite the reverse.

UKCTA believes the current drafting is simply not suitable for a market which typically involves immediate delivery of digital content to order. Rather than the wording currently proposed UKCTA believes it would be more appropriate to require suppliers to provide greater transparency and information as to the quality and any intended purpose of digital content and to require suppliers to ensure that the content is fit for any such purpose stated by the supplier.

Failing which, if the Government is minded to persevere with the current drafting, suppliers ought to be given an opportunity to respond within a reasonable period to the consumer and either affirm the consumer’s stated purpose or to explain that the digital content is not suitable for the purpose stated by the consumer before the consumer purchases the content. If the consumer does not wait for a response from the trader before purchasing the digital content, the contract should not be treated as including a term that the digital content is reasonably fit for the consumer’s stated purpose. We envisage however that such a regime could only work if content delivery systems were modified to add an additional order step requiring consumers to notify suppliers of their intended purpose, and this would inevitably result in delayed delivery of the content. We do not believe this would be regarded as a positive development by consumers.

As already noted above UKCTA has concerns about the use of the term “as a matter of custom” and these concerns apply equally to Section 36(6). As with our earlier comment on this point we would suggest deleting this subsection.

3. Time when, and Period for which, Digital Content is Provided—S. 41(3)

UKCTA believes that the reference to a “reasonable period of time” in this subsection could be interpreted by some consumers as overriding the enforceability of express limitations brought to the consumer’s attention prior to the point of purchase. For example, if digital content provided by way of a streaming service is often made available for a short period of time. In those examples with which UKCTA members are familiar this is made clear to the consumer prior to the point of sale. The period of validity of the content is another factor weighed up by the consumer in determining whether or not to purchase and it should not therefore be open to the consumer to seek to use a statutory provision to argue that the period set by the seller was unreasonable. UKCTA believes that the wording should be clarified to ensure that such a right would only occur where a seller did not make clear prior to the sale the time period for which the content would be available for streaming by the consumer.

4. Services

S.52—Information provided about the trader or service to be treated as binding

S.52(1)Every contract to provide a service is to be treated as including as a term of the contract (whether or not it does so expressly) anything that:

(a)is spoken or written to the consumer by or on behalf of the trader about the trader or the service, and

(b)is taken into account by the consumer when deciding to enter into the contract or when making any decision about the service after entering into the contract.

UKCTA supports any measures designed to ensure that consumers must be provided with correct and up to date information on products and services. Consumers should be able to rely on the information they are given. Consumers are already protected under the Consumer Protection from Unfair Trading Regulations 2008 (the “CPRs”) but UKCTA has concerns that the drafting of section 52 may produce unintended consequences. In our Members’ experience many transactions involve occasions when customer service agents are chatting to consumers to give them some background information on a particular product or service. The flexibility which companies currently have, allows agents to talk to consumers in a friendly, personable way whilst providing accurate and clear information. It would be regrettable if as a result of section 52 consumers were greeted with completely scripted and wooden responses because agents were too wary to engage in any other conversation.

Our member companies devote significant time and effort in training customer service agents to make the consumer’s interaction with them as easy and pleasant as possible.

Inevitably, there will be some essential information which is scripted which must be shared with the consumer so that they fully understand their rights and obligations, for example key contractual information so that the consumer understands their rights and obligations and so that the Communications Provider can be sure of compliance with existing consumer protection and Ofcom regulations. Typically telephone based conversations are followed up by a postal delivery or email of service or product as well as contractual information. This already involves the opportunity to cancel the order if the consumer changes their mind within the cooling off period specified in existing regulations.

It is possible that although our members do their utmost to ensure their staff do not mislead potential customers, section 52 as currently drafted, would lead to the only prudent course of action being to ensure that contact centre agents stick rigidly to a pre prepared script and not to engage with consumers any further than that, in order to ensure that no unscripted comments were to form part of the contract. This would in our view lead to a poorer consumer experience across the sector.

Alternatively CPs might have to go through the entire contract on the phone with a consumer; again we do not believe this would be welcomed by consumers any more than it would be by our members. Our members already do highlight the main terms of the agreement; for example the price, minimum term, product being purchased etc. Full contractual documentation is then sent allowing consumers to consider it within the cooling off period. Consumers are used to transacting in this way and we believe they understand that the terms and conditions which they receive by post constitute the final contract. They also have the opportunity to cancel the contract within any applicable cooling off period. Again this right is increasingly well understood by consumers. The consequence of section 52 would be that consumers were able to add additional terms to their contract based on their conversation with the contact centre. Each consumer would in effect have a bespoke contract. This would be confusing and would be an enormous administrative burden on service providers. The additional costs of recording such bespoke arrangements would be significant and costs would inevitably be passed on in some form or other to consumers.

There is a considerable body of consumer protection law already which UKCTA believes adequately protects consumers today. Communications Providers are regulated sector specific regulations and in particular General Condition 9 of the General Conditions of Entitlement regime monitored by Ofcom. This condition sets out certain mandatory provisions which must be included in consumer contracts.

Further protection against misrepresentation is provided by the law of misrepresentation, the CPRs and in addition, the cooling off periods provided for under the current Door Stop Selling Regulations1 and the Consumer Protection (Distance Selling) Regulations 2000 (to be replaced by the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations) that allow consumers to change their minds if they are unhappy with the products or services or the terms of the contract.

Although the Government has reasoned that clarification to consumer rights is important because “consumers are more likely to suffer detriment they are unable to resolve”, for the communications industry that is simply not the case. As part of the General Conditions of Entitlement regime all communications providers are required to be part of an ADR scheme; these arrangements are widely regarded as effective and the ADR schemes are well utilised by consumers.

We consider that this additional layer of consumer protection is unnecessary and disproportionate.

5. Unfair Terms

S. 67 (2) & (4)—Exclusion from assessment of fairness

S.67(2)Subsection (1) excludes a term from an assessment under section 65(1) only if it is transparent and prominent.

S.67(4)A term is prominent for the purposes of this section if it is brought to the consumer’s attention in such a way that an average consumer would be aware of the term.

UKCTA has some concerns about the requirement for price terms to be “prominent” in order to be within the exemption under section 65(1) so that the term is not assessable for fairness. In the electronic communications sector consumers frequently purchase a “bundle” of services, and not infrequently they may initially purchase a primary service such as telephony but subsequently supplement this with a service such as broadband, superfast broadband or increasingly a TV service. These are often priced separately but form part of the same contracts. UKCTA is concerned that under the Bill, charges could be subject to an assessment of fairness if they are not brought to the average consumer’s attention at the time of entering into a contract.

For example most of the major consumer focused CPs offer a variety of fixed-line telephony packages. These typically require the consumer to pay a monthly subscription cost in return for a telephony service and an inclusive allowance which allows the consumer to make various types of calls without additional charge, eg evening and weekend calls to landline numbers within the UK, or calls to overseas landlines, or to mobile phones. This is standard practice within the industry and indeed it is difficult to find a service which does not offer some form of calls allowance. In addition to calls covered by the bundled allowance, these services also allow consumers to make calls which do not fall within the inclusive usage allowance. Although the most common or popular call charges can (and are) be brought prominently to the consumer’s attention, it is simply impractical during the sales process to draw a consumer’s attention to every possible call charge which the consumer might incur. The best that can be done is to refer a consumer to standard price lists detailing such charges.

As currently drafted section 67 would mean that any call charges not brought to the average consumer’s attention at the point of sale, would not fall within the price exemption.

UKCTA fears this will considerably lengthen sales calls, and in so doing reduce the likelihood that the consumer will absorb other more important information provided during the call as they will have simply switched off through boredom while they are given information about charges they may or may not incur at a point in the future.

CPs already routinely refer consumers to pricing information on their website in cases where such information changes regularly. An example of this would be charges for directory enquiry calls which change frequently due to circumstances beyond the control of the CP. In such cases it is nigh on impossible to provide consumers with up-to-date information in hard copy documents. Indeed the risk of providing out of date information would increases with the use of hard copy rather than electronic information about such charges. Would such electronic information be considered to be sufficiently “prominent” that the average consumer would be aware of it and so within the exemption in s65 (1)? This seems to UKCTA to be far from clear. We would welcome further clarity on these points. We understand from the BIS workshops that BIS will be discussing this issue with Ofcom to assess the impact on the communications sector. We support transparency for consumers but we would caution against measures which are impractical to implement.

6. Other Requirements for Contract Terms—S.71(2) and (3)

S.71(2)If a term of a consumer contract is especially onerous or unusual, the trader must ensure that the term is drawn particularly to the consumer’s attention.

S.71(3)Whether a term of a contract is especially onerous or unusual is to be determined, in particular, by reference to the subject matter of the contract.

UKCTA has similar concerns under s71 (2) to those which we expressed above in relation to section s67 (4). As explained above, communications providers typically have an extensive tariff guide detailing the call charges to all types of number range and to international destinations. What may be “unusual” for one person may be entirely normal for another. For example most consumers will never have any occasion to call Kiribati and so calls to that country would indeed be out of the ordinary, whereas a consumer with a friend or relative there might find nothing at all unusual in such calls. The Bill’s use of the term “unusual” does little to provide clarity or certainty of what is required. How are UKCTA members to determine which call charges are unusual and there must be “drawn particularly to the consumer’s attention”. This is an even higher test than the “prominence” test under s65 (4).

We understand from one of our members who attended that at one of the recent workshops on this topic, BIS confirmed that s71 applied at the time the contract was concluded which would mean that for telephone sales, the agents would be required to read out any “unusual” call charges. UKCTA cannot believe that this is BIS’ intention but the unintended consequences may be that in the communications sector, in order to avoid the price terms of call charges being assessable for fairness, providers are required to bring all “unusual” charges to the consumer’s attention thereby nullifying any attempt to give prominence to terms which ought properly to be highlighted for consumers.

7. Conclusions

We understand the Government’s desire to enhance consumer protection but we do not believe that a one size fits all approach necessarily works. Certain protections, which may operate without any great difficulty in one scenario, may cause difficulties for both providers and consumers in another. In those areas which we have highlighted above, we believe that the specific measures proposed will cause difficulty in relation to services which involve the immediate delivery of digital content. It is easy to envisage them requiring changes to the delivery systems which will degrade rather than enhance the consumer’s use of the services.

UKCTA believes that the Government ought to look very carefully at the issues we have highlighted and to consider whether in these limited areas, the electronic communications sector ought to be exempt from these particular regulations. There is already established precedent for this course of action within BIS’s attempts to implement the Regulations. Regulation 6 provides that the Regulations do not apply to contracts for services of a banking, insurance or investment nature. UKCTA understands this approach was adopted because Government felt that regulation of the financial sector was better addressed through sector specific legislation. UKCTA believes that the practical difficulties which we have described suggest that the same approach ought to be followed in relation to the Electronic Communications sector.

13 September 2013