When publican Stephen Reid tried to cancel his BT Sport subscription he was told he couldn’t. Reid, owner of the Kettledrum Inn in Burnley, Lancashire, had agreed to continue the service, but reconsidered a few days later because the package had changed.
However, when he contacted BT he was told that the contract, agreed and recapped over the phone, was binding. He says: “When I found out there was no cooling off period, I was shocked. I thought I’d had consumer rights. They said I’d have to pay the full amount, which was just under £2,000.”
A BT spokesperson responded that Reid had been “advised of the terms and conditions, including the minimum term, and entered into a contract with us on that basis”, adding that “business customers do not have the same statutory cancellation periods consumers have”.
Reid, who bought the pub two years ago, has launched a petition urging the government to improve consumer rights for small businesses when agreeing contracts over the phone. There should, he says, be 14 days for a small business to consider such an agreement in full. “The main issue was the realisation that as a small business I have no equivalent ‘consumer rights’.”
David Smellie, partner at BP Collins solicitors, says business-to-consumer contracts are subject to stricter legislation than business-to-business contracts. “A supplier can include greater restrictions when it is dealing with a business as opposed to dealing with a consumer. The problem is that no differentiation is made between a micro business and large multinationals, where the latter has the resources and expertise to review contracts and monitor the supplier relationship closely.”
Fifty two percent of small businesses have fallen foul of unfair supplier contract terms, according to research by the Federation of Small Businesses (FSB), released on Monday. It found that 24% of cases were because of hidden auto-renewal clauses.
Guy Levine, CEO of internet marketing service Return on Digital, was caught unawares when an agreement with a software provider renewed automatically without warning. “We gave them a ring and were presented with an extract from the contract and told ‘tough, these are the terms you agreed to’. There was no cooling off period, no break clause.”
Levine says he would have broken the contract, given the chance but was instead denied the opportunity to assess the competition available and renegotiate the terms if necessary.
The issue is not with auto-renewal contracts per se, but how they are handled. Return on Digital use contracts that renew but have a process to let clients know, with reminders sent 45, 30 and 14 days before the renewal date.
Levine feels this sort of notice period should be required legally for all contracts, as should a 30-day cooling off period, while contracts should be written in language everyone can understand. Currently, he says, they are “written in a language that means only a lawyer can deal with it and partner fees are between £250 and £400 an hour”.
Mike Cherry, FSB national chairman, says: “Small business owners behave in a similar ways to consumers, but don’t have the same guarantees of quality or legal redress in an unfair situation.”
Small businesses are also subject to high early termination fees (20%) and lengthy notice periods (23%), according to FSB’s figures. Two in five felt powerless to do anything about unfair terms, because the supplier was too big to challenge.
One owner of a boutique retail business, who wants to remain anonymous, says her broadband and phone provider has left her “over a barrel” after she moved business premises. “I want to move from this company but they won’t allow me to before the end of the contract [in November] without paying draconian level fees. As well as a severance fee, I’d have to pay the rest of the contract to get out.”
After agreeing to stay with the provider for another two years, she had to wait more than two weeks to be connected, and is still fighting bills for new equipment she doesn’t need, limited service (including no answer phone), and restricted internet access.
“I’ve spent something like 16 hours on the phone and it still isn’t resolved,” she says. “I’ve engaged a solicitor to help me write the letters. With all these extra charges the cost is just under £1,000. I’ve got to do a lot of work to make £1,000 profit.
“I know I’m not the only one. We talk about it as business owners all the time and it’s always the telephone and broadband. I knew one guy who had to run his business from a Costa coffee shop for three weeks.”
She says small businesses should have better protection against big corporates. “The internet and phone are the most critical tools a small business has. The fact they have the ability to [damage] an organisation isn’t on. If I treated my customers like this, I wouldn’t have a business.”
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