Tuesday, March 02, 2010

Facets of telco regulation

The CEO of ACCAN, Alan Asher, when discussing the status of telco regulation in Australia will at times note the lack of effective enforcement action by our regulators. Meanwhile Communications Alliance CEO Anne Hurley upset some of her members when in response to the Government consultation on Australian Consumer Law she suggested that the telco sector should only face one consumer regulator not two.

Today there is a report that one telco has admitted to the ACCC that its sales practices were likely to mislead customers, and that it had referred consumer debts to debt collection agencies while disputed over the "slamming" that had occurred.

The interesting point is that while these actions fall foul of the general prohibitions in the Trade Practices Act, they are each specificinstances of breaches of the relevant industry codes. In particular they are breaches of the Consumer Protection Code provisions on sales practices, complaint handling and credit management.

The question is why are the matters being dealt with by the ACCC under the general powers rather than the ACMA under the specific powers.

Meanwhile there are also a report of the ACMA prosecuting a telco over actions in breach of the Do Not Call register legislation when the same behaviour was dealt with under enforcement by the ACCC. Clearly in this case it is different aspects of the conduct being prosecuted - ringing the wrong people versus saying the wrong things.

Both cases involve a telco employing a selling agent, a case which always creates compliance challenges. In the latter case the telco claims it is being pursued over practices that it has fixed. It ultimately raises the question of how compliance programs should work and how much protection a firm should ge from them.

By their very natue sales activities are not directly supervised and "agents" (be they individuals within a sales organisation or a outsourced agency) can have incentives to "break the rules". As a consequence breaches are almost certain to occur - just as the law against fraud doesn't mean there isn't lots of fraud, or the law against theft doesn't stop lots of petty cash tins being light.

In those cases the enforcement action is usually brought directly on the contravening individual, but compliance with the TPA or telco codes is a responsibility of the principal not the agent.

It was in recognition of this fact that the ACCC played a leading role in the creation of an Australian Standard for compliance programs. The ACCC at least informally considers the approach to compliance in its decisions on whether to prosecute. I don't think the ACMA has developed as sophisticated a view. Certainly consumer advocates seem to be unaware of the distinction.

Ultimately the issue is how well you as a firm communicate the compliance message, train staff or agents on compliance and legal obligations, construct incentive schemes so that non-compliance can't be rewarded and finally manage the complaint process so that complaints that indicate non-compliance are aggressively used to identify "rogue" agents. It is unfortunately the latter that is most usually deficient with telcos all too often wanting to believe that the customer's claim of misleading conduct is just a cover for wanting to brake a contract.

Meanwhile in Europe regulators have taken decisve action on the latest source of mobile "bill shock" - high data roaming charges. Could Australia apply to be part of Europe for this?

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