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Notice to Industry Administrative Charges from 1 April 2009

1 April 2009


Administrative charges from 1 April 2009.


Following the first twelve months' operation of the newly introduced Code Compliance Panel (‘CCP') the administrative charges invoiced to companies found to be in breach of the PhonepayPlus Code of Practice, eleventh edition amended April 2008 (‘Code'), have been reviewed and amended. The amended administrative charges take effect from today, as detailed below.

The new charges will be applied to service providers and information providers (where a case has proceeded against an information provider) (‘providers') found in breach of the Code. The new charges will also apply to network operators (‘networks') that are found to be in breach of the Code.

The administrative charges system is evidence of PhonepayPlus' ongoing commitment to provide effective and proportionate regulation to the industry based on the ‘polluter pays' principle announced by PhonepayPlus in its three-year strategic plan. The benefits to the industry of the ‘polluter pays' principle are two-fold:

  • Networks and providers found in breach of the Code will pay administrative charges proportionate to the time PhonepayPlus personnel spend bringing their cases to conclusion, and will know in advance the fixed charge for the cost of Tribunal hearings and review applications to the CCP
  • Networks and providers that comply with the Code will not subsidise, through their levy payments, the regulatory costs related to the behaviour of those in breach, and will ultimately receive the benefit of lower levy rates


Background

An administrative charge system was first introduced in September 1992 and was substantially altered in January 2008 from a fixed charge for a category of case (whether simple, standard or complex) to an hourly rate for investigations that more properly reflected the time and expense incurred by PhonepayPlus personnel in bringing cases to a conclusion. The fixed charges for adjudication panels and oral hearings remained in operation.

In this new system of hourly charges for investigations, rates are calculated to include the direct cost of personnel involved in bringing each case to a conclusion. They also include a proportion of overheads (such as rates, rent and electricity) that can be fairly attributed to those personnel.

The methodology and calculations for the hourly rate system were checked by PhonepayPlus' auditors, Mazars LLP, to ensure that they are appropriate and reasonable.

PhonepayPlus has the right to review charges as and when required, and the new administrative charges that will apply to investigations started after 1 April 2009 marks the conclusion of PhonepayPlus' most recent review. The hourly charge rates were calculated using our 2009/10 budget for expenditure approved by Ofcom on 10th March 2009, and the fixed rate charges reflect the actual cost of the operation of the CCP in its first full year of operation projected forward for 2009/10.

Code Provisions

The relevant provisions of the Code dealing with administrative charges are to be found at paragraphs 8.12 and 9.2.6

8.12 "All service providers found to be in breach of the Code may be invoiced for the administrative and legal costs of the work undertaken by PhonepayPlus. Non-payment within the period laid down by PhonepayPlus will also be a breach of the Code and may result in further sanctions being imposed. PhonepayPlus may direct that the relevant network operator withholds and passes to PhonepayPlus the sum(s) due from the payments outstanding under the contract between the network operator and the service provider."

9.2.6 "All network operators on whom a sanction is imposed may be invoiced for the administrative and legal costs of the work undertaken by PhonepayPlus. Non-payment within the period laid down by PhonepayPlus will be a failure by the network operator to comply with its obligations under the Code and may result in the imposition of a further sanction direction."

New Administrative Charge Rates

Hourly Rate Charges for Investigations

Personnel

Hourly Charge (£)

Administrator

73

Investigations Executive

78

Head of Investigations

130

Head of Industry Support

113

Director of Standards & Communications

277

Director of Legal

282

Chief Executive

382

Head of Legal

169

In- house Lawyer

100

Fixed Rate Charges for Tribunals

Per Adjudication Case

1,121

Oral hearing - per half day

2,860

Emergency procedure decision

220

Application to review an adjudication

300

Secondary case charges (per case)

20

Informal representations (per half hour)

83

NB All charges are exclusive of VAT

Notes on Administrative Charges

Charges for Tribunals include only the direct costs associated with CCP members' time and costs in preparing for and attending the panels.

The total administrative charge, which is subject to the Panel's recommendations to the PhonepayPlus Executive, will be determined by the complexity of the case and the hours spent by PhonepayPlus personnel in bringing the case to a close, as well as the cost of all secondary cases received.

All disbursements relating specifically to a case will also be charged to the provider (including external legal costs and, where appropriate, counsel's fees). It should be noted that:

  • the Administrator's costs of preparing papers for a Tribunal are included in the fixed charge for the Tribunal
  • there is a separate Administrator's and photocopying charge in connection with the papers prepared for an Oral Hearing, as these are invariably substantial and cannot be estimated in advance
  • an Oral Hearing is clerked by a junior barrister appointed by the CCP whose fees are separately charged as a disbursement


Informal representations to a Tribunal can be requested by a network or a provider for a period of half an hour, or an hour. The Executive will not normally raise administrative charges for an oral representation unless a substantive breach of the Code is upheld by the Tribunal.

The fee of £300 for an application to review an adjudication is payable on submission of the application. If the application is granted, the review itself will be charged on the ‘per adjudication case' basis if the network or provider is found on review to be in breach of the Code.

The charge for secondary cases reflects the cost of receiving and logging a complaint as evidence for an investigation, the cost of keeping the complainant informed of the progress and outcome of the complaint, and the arrangements for a call charge refund when sanctioned.

A simple illustration of how the ‘time spent x charge rates' basis will work is set out below:

Hours charged

Investigations Executive

30 hours @ £78

£ 2,340

45 additional cases

@£20

£ 900

Investigations Manager

1 hours @ £130

£ 130

Head of Legal

30 minutes@£169

£ 84

In house lawyer (clerk role)

6 hours@£100

£ 600

Adjudication Panel

per case

£ 1,121

Total administrative charge

£5,175

At the time of raising breaches with a provider, PhonepayPlus will continue to instruct the provider's network operator to withhold an estimated administrative charge from revenue generated. This estimate will take into account all secondary cases received to date.

Cancellations

As outlined above, there is a charge for an oral hearing of £2,860 per half day. Should a request for an oral hearing be subsequently cancelled by the network or provider, the network or provider will be charged for all costs incurred by PhonepayPlus up to the time of cancellation. If the cancellation is made less than five working days before the hearing, the fixed charges for the hearing will apply.

The Administrative Charge Process

  • 1. The letter of adjudication sent to any network or provider found to be in breach of the Code
    will include an administration charge invoice. Where we are awaiting notification of external
    legal costs, the administration charge invoice will be forwarded under separate cover.
  • 2. Payment terms are 10 days.
  • 3. VAT will be applied to all charges.
  • 4. Non-payment of the administration charge is considered to be a serious breach of the Code, and may result in the imposition of further sanctions by a Tribunal.
  • 5. If the administrative charge remains unpaid by a provider, the network operator will be directed to pass over withheld funds to meet the outstanding debt to PhonepayPlus. If the full debt is not satisfied, access will be barred to all of the provider's lines until such time as full payment is made.


Date of application

The new rate for all fixed charges will apply from 1 April 2009, irrespective of the date the investigation commenced.

The new rate for hourly charges will apply from 1 April 2009 for all cases formally opened on or after 1 April 2009. However for cases opened up to and including 31 March 2009, administrative charges will be applied under the existing hourly rates.

Revision

The fixed and hourly charge rates are updated annually on 1 April, based on the then current year's approved budget, unless otherwise determined by PhonepayPlus.

1 April 2009