Ofcom issues OSA Consultation on fees & penalties

Ofcom has released its latest consultation on the Online Safety Act 2023 (the OSA). As the UK's online safety regulator, Ofcom is looking to establish a key part of the regime – fees and penalties – and has set out its proposals for how it intends this will operate.

Who is liable to pay fees and penalties? 

Fees (and potentially penalties, in certain circumstances where a breach of the OSA has occurred) will soon become payable by providers of regulated services in the UK falling within the scope of the OSA, based on a calculation of qualifying world revenue (QWR). The calculation of QWR is intended to be straightforward, but involves a number of components that may prove to be complex, considered further below.

Ofcom is proposing that such providers will be liable to pay fees to Ofcom if their QWR is £250 million or higher (QWR threshold). The QWR threshold will be set by the Secretary of State for the Department for Science, Innovation and Technology, and Ofcom considers anything between £200 million - £500 million to be an appropriate threshold. Providers of regulated services will be required to notify Ofcom if their QWR meets or exceeds the QWR threshold (with these notification requirements also being consulted upon).

The consultation suggests that fee calculations will be conducted using a ‘single percentage’ approach. This means all providers with revenues above the QWR threshold will pay the same percentage of QWR (currently estimated by Ofcom as 0.02%), enabling a fair and proportionate approach.

As part of its enforcement powers under the OSA, Ofcom also intends to link breaches of the OSA to a provider’s QWR. The OSA currently provides Ofcom with the ability to impose a penalty of up to 10% of a provider’s QWR or £18 million (whichever is greater). However, the proposed calculation of QWR varies slightly between fees and penalties, for maximum deterrence.

What is considered QWR? 

Ofcom's proposal is that QWR is determined as the total amount of revenue of a provider referable to a regulated service, i.e. it must arise "in connection with the provision of the service, comprising all of its parts, anywhere in the world" across a 'qualifying period'. Occasionally it will not be possible to separately identify revenues arising in connection with a regulated service from those arising from a provider’s other activities. In these circumstances, Ofcom expects a 'just and reasonable' apportionment to be made to reasonably reflect the relative contribution of the regulated service to the overall revenue of the provider. What is reasonable will differ depending on the context, but Ofcom suggests that considerations may include:  

• the amount of advertising revenue generated from adverts displayed within the regulated service;  
• the proportion of the provider’s operating costs related to maintaining the regulated service; and/or 
• the amount of time users spend using the regulated service in comparison to other services offered by the provider on the same platform.  

Worldwide Revenue 

Fees: Ofcom is intending to calculate QWR based on the total worldwide revenue of a provider arising from the regulated service. However, it has proposed an exemption to avoid unfairly disadvantaging providers who have large global revenues, but relatively small revenues attributable to the UK (see Fee Exemptions below).  

Penalties: Ofcom considers that worldwide revenue arising from a provider’s regulated service is also appropriate for calculating penalties for breaches of the OSA, stating that the cap would be too low for several of the largest regulated providers if based only on UK revenues.  

Qualifying Period & Accounting Period 

Fees: Ofcom is proposing that the ‘qualifying period’ over which QWR is to be calculated will be the "second calendar year preceding the one within which the charging year begins", with the ‘charging year’ being 1 April to 31 March each year. For example, the qualifying period for the year 1 April 2026 - 31 March 2027 would be 1 January 2024 - 31 December 2024. This is consistent with the qualifying periods in other sectors that Ofcom regulates, such as broadcasting.  

Penalties: In calculating penalties, Ofcom intends to instead review a company’s (or company group’s) QWR in its most recent completed accounting period, instead of its qualifying period.   

Group Companies 

Fees: Where a regulated provider is part of a group of companies, the OSA enables Ofcom to determine the provider’s QWR by including a proportion of the revenue of other members of its group which receive QWR referable to the provider’s regulated service. If a provider is acquired by or divested from a group of companies during a qualifying period, it will need to calculate QWR taking account of these structural changes, i.e. only considering the revenue received during the part of the charging year where it is a member of the group. 

Penalties: Ofcom has proposed that in relation to penalties, it may impose liability on a provider together with any other entities in its group that it finds to be jointly and severally liable for the relevant breach (together, the liable group undertakings). Where a penalty is imposed on the liable group undertakings in this way, the maximum penalty will be the greater of £18 million or 10% of the QWR of the provider and every other entity in its group (whether or not such revenue relates to the provision of a regulated service). 

Fee Exemptions 

Ofcom has suggested a number of exemptions to the payment of fees: 

• UK revenue threshold: To avoid providers with small UK revenues paying fees and disincentivising investment in the UK market, those whose QWR is above the QWR threshold, but whose UK referable revenue is less than £10 million in the same qualifying period, will not be liable to pay fees for that charging year.  
• Video sharing platforms (VSPs): VSPs will eventually be regulated by the OSA as user-to-user services (they are currently regulated by Ofcom under a separate, VSP regime), and will therefore be subject to the OSA fees regime. However, until the VSP regime has been repealed and the transition to the OSA regime has completed, VSPs will be exempt from the requirement to pay fees (though they will still be subject to the notification requirements).  
• Charitable purposes: Some regulated services may be operated for charitable purposes or public interest objectives. Ofcom is aiming to avoid the use of charitable donations to pay fees. At present it does not propose an exemption for these providers given that they are unlikely to meet the QWR threshold. Should this change, or if Ofcom receives consultation responses to the contrary, it may reconsider its decision.  

Next Steps 

Any responses to the consultation must be submitted to Ofcom by 5pm on 9 January 2025. Ofcom anticipates that regulations governing QWR will come into force throughout 2025, with the first invoices issued in Q3 2026 to providers liable to pay fees for the 2026/2027 financial year.