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March 13, 2014 - Rachel Miller

Small firms need consumer-style protection, says FSB

Small firms need consumer-style protection, says FSBThe Federation of Small Businesses (FSB) has called on the government to give small businesses the same level of consumer protection when drafting legislation as domestic customers.

In a new report – Small Businesses as Consumers: Are They Sufficiently Well Protected? – the FSB says that many small businesses are disadvantaged compared with both large businesses and domestic consumers when they take out a contract with a new energy, telecoms or water provider.

John Allan, FSB national chairman, said: "Small, and especially micro, firms don't have the same capacity to make buying decisions in the way large businesses do. They have much more in common with domestic consumers and we believe it makes sense for the level of consumer protection afforded to micro and small firms to reflect that. We want to see the big six publish their tariffs for small business customers in a clear and transparent way."

The report highlights the major issues affecting small businesses:

  • Lack of expertise in purchasing: most small businesses have as much expertise as a domestic customer and are far less likely than large firms to have staff with a specific procurement role.
  • Less time to make purchasing decisions: business owners are busy running their own businesses. Most small businesses simply want their heating to work and water to be on. They do not think they will benefit significantly by spending a lot of time choosing their ideal energy supplier.
  • Less bargaining power: smaller businesses have far less bargaining power than larger firms.

The FSB is calling on the energy regulator to make utility suppliers publish their default tariffs for smaller business customers. It also recommends that all regulators with powers to enforce consumer protection regulations are given the ability to protect businesses from the mis-selling of products or services.

The 2003 Communications Act that regulates the telecoms industry is, according to the FSB, a model of best practice that could be copied across all regulated industries. Under this law, the regulator treats micro businesses like domestic consumers unless there are clear reasons not to.

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