Regulator Finds Marketing Licence Breach
Business Ethics and Corporate Culture, Other
The UK Office of Gas and Electricity Markets (Ofgem) has announced that EDF Energy has agreed to pay £4.5 million to affected consumers, following an Ofgem investigation which found that the energy supplier breached its marketing licence conditions. According to Ofgem, the company has also accepted that its sales processes did not meet the regulator’s marketing rules, introduced in 2009, and had this not been the case, EDF would have faced a higher penalty. The investigation revealed that the processes and controls used by EDF “to ensure compliance with the rules governing clarity and accuracy of sales information” were not up to standard.
Ofgem’s media release (9 March 2012)
Consumer Voucher Operator Breaches Advertising Code
Out-Law reports that the UK Advertising Standards Authority (ASA) has ruled that Groupon breached advertising rules when it promoted a cosmetic treatment on its website. Reportedly, the advertisement on the website featured discounted “facial injection treatments” which were in fact Botox treatments. Botox is reportedly a prescription-only medicine, the public advertising of which is prohibited under the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing. Groupon has reportedly been prohibited from featuring the same advertisement again and has been told “to take care when promoting offers of this type to ensure they do not inadvertently advertise a prescription-only medicine”.
According to Out-Law, Groupon defended its actions by stating that the advertisement was not promoting Botox but instead “a redeemable voucher for a supplier of a choice of services”. Reportedly, Bath Facial Aesthetics, which was involved with the offer, had told ASA that the advertisement promoted two discounted treatments – one specifically for Botox and the other offering consumers a choice between Botox injections or a dermal filler. The ASA reportedly made its decision following this revelation. Follow the ASA’s decision, Groupon has stated that it has “further improved [its] checks and processes around claims for health and beauty products to make sure [its] customers have the information they need to make informed buying decisions”, reports Out-Law.
Out-Law: Groupon’s Botox voucher promotion in breach of advertising rules, watchdog says (14 March 2012)
OFT Revokes Companies’ Licence for Prolonged Breaches
The UK Office of Fair Trading (OFT) has announced that it has decided to revoke the consumer credit licence of credit broker Yes Loans Limited (Yes Loans), as well as two associated businesses, Blue Sky Personal Finance Limited and Money Worries Limited. According to the OFT, Yes Loans failed to comply with the Consumer Credit Act 1974 and associated regulations, and with requirements previously imposed by the OFT.
Yes Loans’ breaches include:
- “using high pressure sales tactics to persuade consumers to provide their debit or credit card details on the false premise that they were required for an identity and/or security check”;
- “deducting brokerage fees without making it clear that a fee was payable, and/or without the consumer’s consent”;
- “failing to introduce some consumers to the product originally sought, frequently arranging short-term, high interest, loans instead”;
- “misleading consumers into believing it was a loan provider rather than a credit broker”; and
- “treating customers poorly by not providing refunds in a timely manner”.
Despite the changes introduced by Yes Loans following the OFT’s findings, including no longer charging upfront fees, the OFT found that “the evidence of prolonged engagement in deceitful and oppressive business practices, and the continuing presence of some of the staff responsible for running the businesses, makes [Yes Loans] unfit to hold a consumer credit licence”.
OFT’s media release (8 March 2012)
Women Execs Earn 10% Less Than Male Counterparts
Business Ethics and Corporate Culture, Employment and Workplace Issues
Mail Online reports that according to a report from executive pay experts Mercer, women in the UK are paid 10% less than their male counterparts. Reportedly, “simple discrimination” is the primary reason for the wage gap. Germany reportedly has the worst pay gap in Western Europe, where a female executive typically gets 22% less than a male executive who does the same job.
Mail Online: High-flying women executives are paid 10% less than men doing exactly the same job (6 March 2012)
(Source: Mail Online)
Treasury Under Pressure to Probe Derivatives Mis-selling Scandal
Business Ethics and Corporate Culture, Consumer Protection, Financial Integrity
The Telegraph reports that the UK Treasury is under pressure to investigate the alleged “mis-selling scandal”, which has seen “hundreds of small businesses … buying complex and costly financial derivatives”. According to The Telegraph, the UK’s major banks, including Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland have sold highly complex interest rate derivatives to small businesses, including a fish and chip shop, care homes, garden centres, farms and hotels, many of whom do not understand these instruments. Reportedly, many businesses owners were liable to pay bills that worth “hundreds of thousands of pounds” when interest rates were cut to a historic low in 2009. An estimated £1.9 billion has reportedly already been paid to affected customers.
Reportedly, the UK Financial Ombudsman Service stated that it has received regular customer complaints regarding derivatives in recent months, with the Financial Services Authority stating it was aware of the issue. According to The Telegraph, in one case, a businessman who took out a £5 million five-year loan was left with a £4.1 million cost of terminating the 30-year swap that was sold alongside it. Treasury has asked the Federation of Small Businesses to survey its members with a view to finding out if the practice is widespread, and has also begun gathering evidence itself, reports The Telegraph.
The Telegraph: Call for inquiry into bank mis-selling scandal (11 March 2012)
(Source: The Telegraph)