Ofgem gains new powers to protect businesses from misleading marketing

Publication date
20th November 2013
Information types
Policy areas

Energy regulator Ofgem today warned that it can now take direct action against ‘rogue’ brokers that missell energy to businesses, after being granted powers by Government.

Under the Business Protection from Misleading Marketing Regulations (BPMMR), Ofgem now has powers to clamp down on brokers and other organisations that are marketing energy products or services to business customers in a misleading way.

Brokers play an important role in helping businesses to compare the market. However, the latest Ofgem research found that around one third of Britain’s smallest businesses have a negative view of energy brokers.

Energy brokers’ fees can be recovered in various ways, for example they can form part of the rate businesses are charged for their energy tariff. However, Ofgem’s survey also found that around one third of businesses who had been approached by brokers did not consider that the broker had been upfront about the costs of their services. Previous Ofgem research has also shown that businesses are concerned about cold calling, high-pressure sales tactics and the unprofessional behaviour of some brokers.

Philip Cullum, Consumer Partner, Ofgem, said:

“It’s crucial for our economy that Britain’s small businesses get a fair deal in the energy market. Getting help from a broker can assist in keeping bills down, but business consumers need to feel confident that they know – and get – what they’re paying their broker for. Brokers could now face investigation by Ofgem if they fail to treat their business customers fairly.

“We’re pleased that Government recognised the value in Ofgem getting these powers, which should give better protection and confidence to businesses. This important addition to Ofgem’s regulatory toolkit complements the major changes we are making to the energy retail market for business and domestic consumers alike. The powers mean that Ofgem can investigate misleading marketing to businesses in the energy sector.”

If appropriate, Ofgem can seek undertakings from brokers and other organisations to stop misleading marketing activity or apply to court for an injunction to ensure that they are complying with the legislation.

Ofgem has also brought in a new set of rules to further protect businesses in the energy market. Since August 26th our new standards of conduct have been in force requiring suppliers to treat small businesses fairly on billing, contract issues and switching. These rules are backed by our powers to levy fines if necessary.

Ofgem has also updated existing rules meaning that 160,000 extra businesses now benefit from protections which stop suppliers automatically rolling over fixed term contracts for more than one year.

So that Britain’s smallest businesses are much clearer on when they should shop around to check they are on the best deal, Ofgem is requiring suppliers to put the contract end date on each bill from the end of March 2014.

Ofgem has also been developing an industry-wide code of practice for brokers that market energy to businesses. This code will set out that brokers have to behave in a fair and transparent way to give businesses confidence when using their services. Ofgem will publish the code for consultation in December 2013.

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Notes to Editors

1. An independent survey with 1,300 businesses was carried out on behalf of Ofgem by Element Energy and The Research Perspective in June-August 2013. Nearly one third of micro business respondents (32%) reported they had a negative view of energy brokers. Around one third (31%) of all businesses that had been approached by a broker disagreed that the broker had been ‘upfront about whether there was a cost to our organisation for their services’ on the last occasion they were approached. Over one in five (21%) of micro businesses that had been approached also disagreed that the broker ‘provided accurate information about the services they offer’.

2. The Business Protection from Misleading Marketing Regulations 2008 include a number of protections such as the prohibition of advertising products in a way that misleads traders. They also set out conditions under which comparative advertising to consumers and business is permitted.

From now, Ofgem and the Office of Fair Trading have concurrent powers to enforce the regulations in the energy sector. This follows the case Ofgem put to the Department for Business Innovation and Skillsat the start of 2013 for the energy regulator to have the powers to enforce the BPMMRs.

3. For more information about the reforms we are bringing in to better protect businesses see this press release: New standards of conduct for suppliers to treat small businesses fairly are now in place.

4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

For further press information contact:

  • Chris Lock: 020 7901 7225
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