The Likely Effects of Compelling Energy Firms to Give Customers ‘The Lowest Tariff’

October 19, 2012

(by Catherine Waddams) This week the Prime Minister championed the idea of making each energy supply company put all its consumers on the cheapest tariff. Sounds like a great idea until you think how the companies will react. If everyone is on the cheapest tariff, there is only one tariff – but it is unlikely to be the lowest price they offer now. Read the rest of this entry »


Two Major Problems with the BIS / EU Approach to Above Cost Surcharges

October 18, 2012

(by Pinar Akman) Following on from Morten Hviid’s recent blog post on above-cost surcharges, this comment seeks to point out two major problems with the Department for Business, Innovation and Skills’ plans to bring forward the EU ban on surcharges (due to come into force in 2014 by the EU Consumer Rights Directive 2011/83/EU). This ban will ‘prohibit traders from charging consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of such means’ (Article 19). This approach wrongly assumes that payment surcharges actually relate(d) to costs of payment methods, and fails to address the danger that companies will simply rename the surcharge and present it as relating to a cost other than payment processing. Read the rest of this entry »


Above-Cost Surcharges: Prohibition vs. Transparency

October 4, 2012

(by Morten Hviid) Surcharges have become a common feature of purchasing products and services online. The airline industry has been subject to particular criticism for charging excessive surcharges that are often hidden until the payment stage of the transaction, and for not offering a free payment option. Under the EU Consumer Rights Directive (2011/83/EU), due to come into force in 2014, “Member States shall prohibit traders from charging consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of such means.” (Article 19). The focus here is on the level of the surcharges. The UK’s Department for Business, Innovation and Skills (BIS) are consulting on whether to bring the implementation of this prohibition forward. However, an OFT report responding to a super-complaint by the consumer group, Which? proposed a different remedy. This would have required firms to “provide clear information on the surcharges/discounts that apply to different payment mechanisms, when first displaying prices on a website” (para 1.22). It would thus focus on the transparency of the surcharges. I argue that the measure proposed by the OFT would be more appropriate than the prohibition prescribed by the EU directive and pushed forward by BIS. Read the rest of this entry »


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