Business Law & Compliance

FSB urges better consumer protection for small businesses

2 min read

12 March 2014

The Federation for Small Businesses (FSB) is calling on Government to give small and micro businesses the same level of consumer protection as domestic customers.

Under the current legislation, many small businesses were found to be disadvantaged in comparison to large businesses and domestic consumers when taking out a contract with a new water, energy or telecoms provider.

The FSB advised the use of the 2003 Communications Act, which regulate the telecoms industry, as a model of best practice that could be implemented across industries.

Under this law the regulator would treat micro businesses like domestic consumers which would give a fairer level of consumer protection to these firms, the FSB said.

John Allan, national chairman, FSB, said: “This research confirms what we at the FSB have been saying for a long time. 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.

“Every minute small business owners spend away from running their business costs them, so many owners aren’t in a position to spend time to find the best deal from their energy supplier. As part of major reforms we want to see in the energy market, the big six should publish their tariffs for small business customers in a clear and transparent way. Business owners want to make informed decisions on which energy supplier to choose and not being able to make meaningful price comparisons places too big a burden on the smallest firms.”

The report, “Small Businesses as Consumers: Are They Sufficiently Well Protected?” also recommended that all regulators with powers to enforce consumer protection regulations should be given the ability to protect businesses from mis-selling of products and services.

Major issues affecting small businesses according to the report:

  • Lack of expertise in purchasing the product or service;
  • High opportunity cost of time spent making purchasing decisions;
  • Low benefits of time spent making purchasing decisions; and
  • Poor bargaining power.

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