Submission to Ofcom Enf Guidelines consultation

ukcta_publicPolicy papers

March 2017

This submission is on behalf of a large group of providers, serving most UK consumers

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1. Executive summary

1.1 This submission responds to Ofcom’s consultation, Ofcom’s approach to enforcement (the ‘consultation’), and the accompanying revised Enforcement guidelines and Enforcement guidelines for Competition Act investigations (the ‘draft guidelines’).

1.2 This submission is made jointly by British Telecommunications plc (‘BT’), KCOM Group plc (‘KCOM’), Sky UK Limited (‘Sky’), Telefónica UK Limited (‘O2’), Virgin Media Inc (‘Virgin Media’) and Vodafone Limited (‘Vodafone’) and supported by the UK Competitive Telecommunications Association (‘UKCTA’) (the ‘Enforcement Reform Group’ or the ‘Group’).

1.3 Between us, we operate both the UK’s two major fixed access networks and the three largest mobile access networks. Directly as retail suppliers, or indirectly through our wholesale divisions, we supply electronic communications services to tens of millions of people, comprising the substantial majority of UK consumers of fixed or mobile electronic communications, as well as the vast majority of enterprise customers.

1.4 This unusual step of a joint submission reflects the importance that the Group places on Ofcom’s enforcement processes. Our aim is to assist Ofcom by providing consolidated feedback that reflects deep and broad consensus amongst the Group, all of whom are providers that Ofcom regulates using its enforcement powers.1

1.5 We strongly support Ofcom’s role as an effective and proportionate enforcement agency. We have a shared interest in upholding a culture of compliance throughout the sector. We want to see consumers protected from rogue traders and unacceptable practices. We support the principle that providers who do not manage their own compliance properly should face incentives to improve.
1.6 We support Ofcom’s decision to review its 2012 Enforcement Guidelines, and most of Ofcom’s specific proposals. Annex 1 sets out a table responding in detail to Ofcom’s proposals, but in summary, we welcome:

(a) Ofcom’s efforts to increase transparency and provide greater clarity as to its practices, and keep the Enforcement Guidelines current with changes in legislation and Ofcom’s practices as they have evolved through experience;

(b) The settlement process, which, notwithstanding our submissions on some matters of detail, is a welcome addition to Ofcom’s procedures;

(c) Streamlining to improve efficiency and eliminate unnecessary steps (for example, no longer requiring non-confidential versions of submissions that are unlikely to be needed);

(d) Moving to a single decision-maker during the first phase of investigations (from the enquiry phase through to a provisional decision) to aid procedural economy; and

(e) Simplifying the guidance and practices around areas such as third-party involvement, and moving to a consistent and simple approach on issues such as when an oral hearing will be offered.

1.7 We oppose some of Ofcom’s proposals. In explaining our views, wherever we can, we suggest different approaches that could achieve Ofcom’s objectives equally effectively. We particularly ask Ofcom to reconsider with an open mind:

(a) Downgrading transparency on timing. We oppose the proposals to drop references to Ofcom’s commitment to 15 working day completion of the enquiry phase and seeking to complete investigations to a specific administrative timetable (currently, 6 months). A better approach would be to retain a commitment to timeliness but build in flexibility without losing transparency and confidence in Ofcom’s processes. We feel especially strongly that Ofcom should retain the practice of giving an indicative timetable at the outset of an investigation, even if flexibility needs to be increased by setting that target at, say, 4, 6, 9 or 12 months on a case-by-case basis.

(b) Reducing engagement. During scoping and throughout the course of active investigations, Ofcom’s proposals will result in less engagement and even less information being provided than is currently the case. Scoping is linked to Ofcom’s planning of investigations, and we see risks in Ofcom removing opportunities to obtain feedback before it has committed to a particular scope (or revised scope). Once set, the scope is generally difficult to revisit and can determine the path of the investigation, including the resources needed. A ‘measure twice, cut once’ approach makes sense. In relation to ‘state of play’ meetings and other ways to keep those under investigation informed, Ofcom’s approach is entirely focused on Ofcom’s needs, and not the legitimate concern of a provider under investigation to understand what is happening in their case.

(c) Removing references to providing information requests in draft form. Ofcom and its stakeholders save an enormous amount of time and effort through the existing practice of providing a short window to comment on a proposed information request before it is issued as a statutory notice. We do not agree that doing so is ‘inappropriate’ in enforcement as a general proposition (although that may be true in specific exceptional cases). This practice should be maintained, not diluted or left unmentioned in Ofcom’s guidelines.

(d) Moving from two decision-makers to one decision-maker for the second (final) phase of investigations. Ofcom’s current guidelines (but not, always, its current practice) is that there ought to be two decision-makers for a final decision confirming a contravention and imposing a penalty. This is the absolute minimum that best practice requires, and is already adopted by Ofcom in relation to Competition Act investigations and exceeded by most other comparable regulators in their sector regimes.2 We support Ofcom’s move to streamline processes during the first phase of the investigation but we oppose the shift to a single decision-maker for confirmation decisions.

(e) The need for a settling party to admit liability, rather than simply accepting an adverse decision. Liability (for example, to third parties who may allege that they have been affected by events considered in an investigation) is distinct from the question of whether a decision is accepted. Ofcom ought to adopt the practice used in some other regimes, whereby an adverse decision is accepted by the undertaking to whom it is issued. This could make settlement easier to achieve in some cases, furthering Ofcom’s objectives.

(f) Weak protection for settlement discussions. Rather than give (as some other regulators have) a clear and strong commitment to the ‘without prejudice’ nature of settlement discussions, Ofcom’s proposals are ambiguous as to how the separation, if any, of the content of settlement discussions and the second-stage decision-making process will work. This will undermine scope for settlement and, at worst, create a fundamental problem of fairness if the contents of discussions about a possible settlement are not properly quarantined from Ofcom’s statutory decision-making.

1.8 These points all rest on the need to ground Ofcom’s enforcement activities in basic principles of regulatory and prosecutorial best practice (as well as full alignment with Ofcom’s legal powers and fulfilment of its statutory duties). That means applying Ofcom’s regulatory principles consistently and ensuring that there is a fair balance between swift enforcement and procedural economy on the one hand, and transparency, accountability and rigour on the other.

1.9 We also think that Ofcom’s review could usefully consider some other proposals:

(a) Widening the remit of the Procedural Officer so that she can consider issues arising in regulatory investigations, as well as issues arising in relation to Competition Act investigations (currently, there is a ‘two-track’ process for the different types of case);

(b) Considering the use of confidentiality rings in complex regulatory investigations involving third-party confidential information, to balance the need for rigour – i.e. to allow the party under investigation to fully exercise its rights of defence – with the need to protect commercially sensitive information (a principle we strongly support);

(c) Adopting a ‘commitments regime’ for regulatory investigations. In the same way that Ofcom has adopted administrative procedures for settlement in regulatory investigations that mirror the statutory arrangements applying to Competition Act investigations, it is worth considering whether some form of binding commitments regime could be adopted for regulatory investigations. Commitments provide a middle ground between informal assurances and settlement, giving Ofcom an additional tool to resolve matters in ways that further the interests of citizens and consumers.

1.10 These proposals and the other suggestions listed in this submission would be straightforward to implement, largely costless (or resource-neutral, when they are deployed) and none would require any changes to legislation. We hope that Ofcom gives these proposals due consideration. We would welcome the chance to engage further with the project team to flesh out these points and explore how these might work in law and in practice.

1.11 This submission is structured as follows:

(a) section 2 provides some context and general points;

(b) section 3 addresses the conduct of ‘regulatory investigations’ – that is, investigations conducted under Ofcom’s sector powers as the national regulatory authority under the European Framework for Electronic Communications. These points relate to section 2 of Ofcom’s consultation document and the draft Enforcement Guidelines.

(c) section 4 addresses the conduct of competition law investigations. These points relate to section 3 of Ofcom’s consultation document and the draft Enforcement Guidelines for Competition Act investigations.

1.12 A full table setting out the Group’s positions with respect to Ofcom’s proposals is set out in Annex 1. Section 3 and 4 focuses mainly on explaining why the Group opposes a minority of Ofcom’s proposals. These comments are meant to be read in conjunction with our strong support for the bulk of Ofcom’s proposals that are not discussed in detail.

1 The scope of this submission is the exercise of Ofcom’s enforcement powers in relation to electronic communications, whether as a sector regulator under the European Framework for Electronic Communications (i.e. under ss.96A to 96C of the Communications Act 2003 (the ‘Act’)) or as a concurrent competition authority exercising its powers in communications markets. In some cases, the issues we address are cross-cutting (e.g. transparency, consistency) but we make no specific submissions in relation to other matters, e.g. Ofcom’s regulation of post or the enforcement of broadcasting licences, or other areas of Ofcom’s work such as regulatory disputes.

2 The CMA’s Case Decision Group is made up of three members (see paragraph 11.30 of the CMA’s CA98 Guidance CMA8). The FCA’s Competition Decisions Committee will comprise at least three people (see paragraph 5.2 of the FCA’s CA98 Guidance). Ofgem’s decision making Panel consists of three members of the Enforcement Decision Panel (see paragraph 6.15 of Ofgem’s Enforcement Guidelines).

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