By: scottvine
FAT LADY SINGS TO THE TUNE OF £2,250,000
Well the votes are in, and it looks like our judges Ofcom and ICSTIS were no impressed by the performances of GMTV and Opera Telecom. This morning Ofcom handed down a fine of £2 million to GMTV, following on from a £250,000 fine handed out to Opera Telecom by ICSTIS on Monday (both record fines).
The fines related to competitions run by GMTV and the premium rate services provided to it by Opera Telecom between August 2003 and February 2007. I have blogged on both decisions outside of this blog (GMTV fine / Opera fine) but want to quickly look at both together a moment.
Some might find it odd that whilst it was Opera would seem to have been the source of most of the deceit, and that GMTV were in the dark for most of this deceit, that it was GMTV that got hit with the largest fine. This partly reflects the different responsibilities of the parties, and also the statutory limits on the relative fines.
For ICSTIS their is a statutory cap of £250,000 for a breach of a single paragraph of their Code. This seems to have been the only thing that saved Opera from a larger fine. According to ICSTIS “but for this cap, it would be possible to justify a fine well in excess of the limit of £250,000″. But GMTV also seem to have gotten off lightly, as the Ofcom as the Committee admits the fine would have been even greater had GMTV not already taken a number of steps to rectify the breaches.
Both decisions highlight that the direct and indirect financial benefits played a leading role in how both Opera and GMTV operated. According to ICSTIS “the prevailing culture was that Opera’s corporate clients’ interests were put first, and that there was little or no consideration of the interests of consumers.” According to Ofcom “the evidence was that GMTV had focussed heavily on the contribution that the PRS competitions made to its revenues and profitability, whilst paying comparatively little attention to its compliance responsibilities”.
What cost GMTV (literally) the most was their apparently laissez-faire attitude to managing their contract with Opera, which meant they never audited Opera’s processes and procedures; and that they blindly accepted Opera’s explanations for 22 adverse adjudications some deemed ’serious, or ‘very serious’ from ICSTIS, with fines totally £122,000. This, according to Ofcom, was ‘grossly negligent’ and not ‘unduly harsh’ due to an ‘ambiguity’ in broadcasters’ understanding of PRS compliance, as GMTV tried to argue.
I think both ICSTIS and Ofcom have gotten things about right this week. The fines were record breaking but we have been getting to stage where they needed to be, and in this case the deceit went on for at least 4 years. Opera had argued with ICSTIS that the loss of the GMTV contract and bad publicity was punishment enough, but I still think it can think itself very lucky that ICSTIS could not fine it more that £250,000, as I believe it would have been more than deserved.
As for GMTV, it is hard to see their lack of oversight of the competitions and of a company with the compliance record of Opera as anything other than being blinded by the revenues accounting for 40% of their annual profits. GMTVs £2 million fine will be mostly covered by £1.5million Opera has agreed to pay to GMTV as compensation for its failings, which means only £500,000 (the amount GMTV argued they should be fined - whilst expecting £1 million) will have to be paid by GMTV directly.
Sep 26th 2007
Great post, Scott.
Is there no credible threat of criminal prosecution in cases like this? If not, I wonder why?
Russ
Sep 27th 2007
Russ, I belive both Ofcom and ICSTIS can refer cases to the Police (although do not) - I guess it would be fraud squad in this instance? Other than that I think a least one member of the public would need to register a complaint with the police related to the case(s) - i.e saying look, I called in here, here and here, and they ripped me off, what are you going to do about it?
Sep 27th 2007
“Is there no credible threat of criminal prosecution in cases like this?”
Good question. I have spent the last two years asking the DTI, Icstis and the Police the same question. It relates to a specific case from 2004 when illegal internet software was used to dial premium rate numbers to defraud the public.
I used the Freedom of Information Act to ask the Suffolk Police about the matter. They claimed they had been aware of the specific details but refused to explain why the companies involved were not prosecuted stating it would not be in the “public interest”.
The DTI (Margaret Hodge) refused to explain and insisted it’s the responsibility of Icstis to explain.
The response I received from Icstis (Sir Alistair Graham, Paul Whiting) was at best evasive and at worst plain inaccurate. I asked them to explain why considering the high level and serious nature of complaint this specific case from 2004 was not referred to the police.
Paul Whiting claimed when icstis investigated in 2004 they decided at the time that the internet services appeared to be compliant with their code so had decided not to forward the case to the police.
Sir Alistair Graham has recently been asked to explain this. In 2005 Icstis had referred the same case to OFCOM because the companies involved had refused to co-operate with the Icstis investigation in 2004. Needless to say I’m still waiting for a reply from Sir Alistair.
Sep 27th 2007
Ah yes, the days of dialler software scams - the bain of dial-up. I recall, in response to that ICSTIS introducing a prior permission scheme in 2004 in an attempt to better regulate things, and didn’t Ofcom extend their powers in this area last year after ICSTIS fined Global Access £50,000? It has to be said though, brin, you are not the first person (member of the public) I have heard of who has been less than happy with responses they received from ICSTIS over recent years.