Channel 4 has been fined £1.5m by the media watchdog Ofcom for charging viewers who entered phone- in competitions on its popular daytime shows Richard & Judy and Deal or No Deal, even though they had little or no chance of winning.
Ofcom warned there had been a "serious breakdown in trust between a public service broadcaster and its audience" over the phone-in competitions, and branded Channel 4 "negligent" for allowing viewers to enter competitions when a list of potential winners had already been selected.
An inquiry commissioned by Ofcom headed by Richard Ayre, the former deputy chief executive of BBC News, found "a systemic culture of denial among the main broadcasters" over the use of premium-rate phone lines.
Channel 4, which made £27.3m in gross revenue from phone-in competitions on the two programmes, was found to be in breach of Ofcom's broadcasting code. The channel has been ordered to broadcast a summary of Ofcom's findings on three separate occasions.
The bulk of the fine – £1m – related to offences on "You Say We Pay", a competition on Richard & Judy, Channel 4's daily teatime show hosted by Richard Madeley and Judy Finnigan.
Between 2004 and 2007, it is estimated that 2.9 million viewers who paid a total of £2.2m to enter the competition had no chance of winning because of "early selection" – some 42 per cent of the total entries.
In "You Say We Pay", viewers were invited to call a premium-rate telephone number at a cost of up to £1 a call to take part in a live competition in which pictures appeared behind the presenters and the contestant had to describe the objects portrayed without referring to them by name.
In February, the Mail on Sunday published an article alleging that many of the viewers who entered the competition had no chance of winning. Channel 4 immediately took the contest off air and launched an internal inquiry in association with the law firm Wiggin.
It concluded that Eckoh, the company that ran the phone lines, had been sending a shortlist of potential winners to the independent production company which made the show, Cactus, up to 20 minutes before the presenters stopped advertising the competition on air. It also found that Eckoh had operated a staggered selection process, so that viewers who called later were less likely to be selected.
Channel 4 was also fined £500,000 over phone-in irregularities on Deal or No Deal, the quiz show presented by Noel Edmonds.
According to Ofcom, Channel 4's management became aware of problems with the staggered selection process on 22 March, but allowed it to continue until 13 May. During this period it made an extra £2.1m, even though 56,000 calls were disadvantaged.
Channel 4 pledged to donate a further £600,000 to Great Ormond Street Children's Hospital yesterday to make amends for the breaches, in addition to £300,000 it has already donated – representing the profit it made on calls received but not entered.
The channel has instigated legal action to recoup its costs against Eckoh, which was fined £150,000 in July by the premium-rate phone regulator PhonepayPlus.
Since February, Channel 4 has been advertising a full refund to all viewers who have been affected and has so far paid out £82,000. It has now withdrawn from all premium-rate phone-in competitions.
The channel will continue using phone voting on Big Brother, but will only charge viewers the cost of the call plus any charitable donation.
Ofcom said that if Channel 4 had not taken such wide-ranging action, the broadcaster would have incurred a larger penalty.
Ofcom has also asked ITV to provide information relating to last weekend's X-Factor final after thousands of viewers complained they were unable to vote for the contestant Rhydian Roberts, who was beaten into second place.