More than 170 pubs have joined a £2bn legal claim aimed at getting compensation from energy firms who are alleged to have paid hidden commissions to third-party brokers.
The undisclosed broker commissions, which were added onto the unit cost of gas and electricity, are said to have falsely inflated energy prices for up to 2m businesses and organisations in the UK.
Law firm Harcus Parker is launching group litigation to reclaim these commissions from the energy suppliers who are said to have paid the money to brokers without customers’ fully informed knowledge.
Harcus Parker is now representing nearly 5,000 businesses after a flood of organisations signed up to join the legal claim in the past week. Of these, 175 claims come from pubs and inns.
Hospitality is one of the sectors that was hardest hit by the situation, alongside schools, Harcus Parker solicitor Olivia Selley told The Morning Advertiser.
She said the amount of money businesses could claim back would vary depending on the amount of energy used. However, she estimated pubs and bars will have, on average, overpaid by around £1,200 a year for up to 10 years.
The hospitality industry is currently weathering financial challenges including increased energy prices, food and drink inflation, and a hike in staff wages.
Loss of faith
Selley added: “The practices of paying undisclosed commissions and sharing the cost back to the user have simply added to the financial pressures faced by operators in this fragile sector.
“The effect of these practices really are cumulative and take effect over a number of years which reduces a business’s ability to cope with financial stressors such as those we have seen in recent years.
“One of the other impacts, beyond the financial, is a loss of faith in advisors who businesses believed were acting in their best interests.”
Harcus Parker senior partner Damon Parker said he was aware this was a difficult time for many pubs, with the higher cost of energy being a particular financial worry.
He continued: “We hope that by returning some of these secret broker fees that were charged on energy bills that we may be able to alleviate some of the financial burden that businesses are suffering.
More to come
Parker added: “It’s been very pleasing how many pubs have signed up, but we believe that thousands more are eligible to join the claim.
‘There’s been a huge acceleration in the amount of companies that have signed-up to the legal claim in the past week and we’re keen to continue that momentum.”
Harcus Parker has signed up businesses from a wide variety of sectors, including large manufacturers, high street stores, sports clubs, and faith groups.
Research conducted by the law firm found that one energy supplier offered brokers as much as 10p per kWh in commissions that were then added to customers’ bills, frequently without their knowledge.
A large number of suppliers offered brokers secret commissions of between 1p to 3p per kWh.
Businesses must meet certain criteria to be eligible to make a claim. Firstly, it must be a business or organisation that has been supplied gas or electricity as a non-domestic energy customer.
Eligibility criteria
It also must have entered into a contract for the supply of gas or electricity in the past 10 years through a third-party introducer or broker. What’s more, the broker and energy company must have failed to clearly tell the business that commission was added onto the unit cost of the gas and electricity it was charged.
Selley said it was not an unusual practice for a company to pay commission for introducing business to the company. Energy suppliers will have paid brokers commission in order to incentivise the broker to recommend them to energy users, she said.
This in itself is not unlawful, but the problem arises where the energy user was not told that the commission was being paid or was not told the amount of the commission.
The law firm is currently in the process of writing to it clients’ energy suppliers with letters before action. These set out the clients’ complaints in detail, giving the defendants the chance to respond to the complaints.
Ultimately, if the claims do not settle following exchange of correspondence, Harcus Parker will make an application for a group litigation order and issue a claim in the High Court.
