Who: The Office of Gas and Electricity Markets (“Ofgem”)
Where: United Kingdom
When: 14 November 2013
Law stated as at: 1 November 2013
In March 2008 Ofgem consulted on gaining enforcement powers under the Business Protection from Misleading Marketing Regulations 2008 (the “BPRs”) and subsequently asked the government to grant them.
On 14 November 2013, the Business Protection from Misleading Marketing (Amendment) Regulations 2013 (the “BPR Amendment Regulations”) came into force, giving the Gas and Electricity Markets Authority (“GEMA”), the independent regulator for gas and electricity markets in Great Britain, enforcement powers under the BPRs.
These powers will enable GEMA to clamp down on brokers and third party intermediaries that are marketing energy products or services to business customers in a misleading way, and are generally consistent with GEMA’s powers relating to the consumer energy market under the Consumer Protection from Unfair Trading Regulations 2008.
More specifically, the new powers include:
1. the power to bring proceedings for an injunction where GEMA considers there has been or is likely to be a breach of regulation 3, 4 or 5 of the BPRs (these regulations prohibit misleading advertising, non-compliant comparative advertising and the promotion of misleading advertising and non-compliant comparative advertising in certain codes of conduct);
2. the power to accept an undertaking where it considers that there has been or is likely to be such a breach; and
3. the power to obtain information for determining whether to bring injunction proceedings.
GEMA’s enforcement powers do not include the power to make test purchases, the power of entry and investigation or the power to enter premises with a warrant, nor is GEMA authorised to undertake criminal prosecutions for breaches of the BPRs.
In addition, Ofgem is 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 intends to publish the code for consultation in December 2013.
Why this matters:
Prior to the BPR Amendment Regulations, the BPRs were enforced by the OFT, local weights and measures authorities in Great Britain and the Department of Enterprise, Trade and Investment in Northern Ireland. These enforcement agencies were responsible for all enforcement on an economy-wide basis and, to date, have not taken any action in the energy sector.
A survey conducted by Ofgem found that businesses are concerned about cold calling, high-pressure sales tactics and unprofessional behaviour by energy brokers. There is also consistent evidence of brokers mis-selling energy contracts. While affecting a minority of customers, such practices can lead to significant detriment to businesses.
It is hoped that the 2013 Regulations will ensure that businesses are provided with information they can rely on to make informed decisions about their energy supply, reducing the costs and inconvenience associated with being on a mis-sold contract not appropriate to their needs. This should lead to more effective switching and contracting decisions by businesses in the energy market, saving them money and providing for a greater degree of trust and engagement.