Ofcom Moot Bigger Penalties for Naughty UK Telecoms Operators

The UK telecoms regulator has proposed that in the future it could impose higher penalties against telecoms and broadband providers that break its rules, which it claims would deliver a “stronger deterrent effect” and thus “reduce regulatory contraventions“.

Yesterday Ofcom fined Unicom £200,000 for a breach of its “mis-selling” rules and earlier this month EE were also fined £1 million after they broken another of the regulators rules related to the poor handling of customer complaints. But in the future these fines could be much bigger.

In theory Ofcom already has the power to impose a maximum penalty worth 10% of a specific provider’s relevant turnover, although in practice the penalty imposed is often less than 1% of turnover. As such Ofcom believes that this raises a “legitimate question” about whether or not their fines are sufficient to provide “ongoing deterrents to operators across the relevant sectors.”

Ofcom Statement on Penalties

We consider that penalties we impose in future cases may need to be higher than those which have been imposed in previous cases, where it is appropriate and proportionate to do so, taking into account all the relevant circumstances of the case in the round in order to achieve the necessary change in behaviour. We are therefore proposing to amend our approach to the setting of penalties, as reflected in the penalty guidelines, in order to give effect to this.

In particular, we propose to make changes that, amongst other things, make explicit the link between the objective of deterrence and the size and turnover of the regulated body subject to the penalty. This would reflect that, although there is not necessarily a direct linear relationship between these variables, the larger the regulated body, the greater the penalty may need to be, in appropriate cases, in order to achieve a deterrent effect on it and others.

We also propose to set out more clearly the value to our decision-making process of precedents set by previous cases and the limits of that value. In particular, we propose to make clear that we will only consider precedents where appropriate and to the extent that they are relevant, and that the older the precedent the less value it has.

The related consultation (here) will remain open for responses until 24th September 2015.