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Revising the Penalties Guidelines

Issued 11 February 2011

Executive Summary

  • BT supports Ofcom’s goal of ensuring that deterrence is a central objective of the penalty guidelines.
  • However, we disagree with Ofcom’s proposal to discard its current approach (focusing on seriousness, precedent and deterrence as a starting point and then adjusting by reference to other specific factors), for a new approach that looks at the facts of the case in the round but places deterrence at the centre of the calculation.
  • We do not believe that Ofcom’s new approach will provide the level of certainty that industry requires for penalties to have the maximum deterrent effect. We also disagree with Ofcom’s conclusions that the current approach is unnecessarily complicated and fails to put deterrence at the heart of the process.
  • In our view, penalties will have the greatest deterrent value if parties clearly understand the factors that will influence Ofcom’s penalty decisions, in order that they can adjust their behaviour accordingly.
  • We, therefore, recommend that Ofcom retains its current approach of establishing a starting point for penalties based on seriousness, precedent and deterrence, and then adjusting up or down based on a clearly defined set of factors.
  • We believe that only this approach provides a sufficient level of transparency and fairness, and absent such transparency Ofcom runs the risk having its penalty decisions successfully challenged on appeal.
  • Moreover, Ofcom’s proposals risk introducing some inconsistency across UK utility regulation, as the penalty regimes of Ofwat, Ofgem and the Office of Rail Regulation more closely reflect Ofcom’s current regime, with deterrence used as one of a number of factors in fining decisions.

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