Small firms lose out through rivals' unfair sales tactics

New government research shows that 53% of small businesses think their profits suffer as a result of unfair sales tactics by rival firms.

A study carried out for the Department for Business, Enterprise and Regulatory Reform found that 38% of those running small businesses who believe they suffer in this way estimate their lost profits at 10-20%.

One-fifth of small business leaders surveyed said they had previously worked in an organisation that they felt used such practices, with 12% actively encouraged to use questionable sales tactics.

The government is to crack down on questionable sales practices through the Consumer Protection Regulations, which will implement the EU Unfair Commercial Practices Directive and come into force on 26 May.

The regulations will ban outright 31 types of unfair sales practices and will for the first time establish a catch-all duty not to trade unfairly, closing loopholes that rogue traders have previously been able to exploit.

The new regulations, which will replace and improve on provisions in 23 pieces of existing legislation, will apply to all businesses that trade directly with consumers, including construction firms.

Trading Standards and the Office of Fair Trading will enforce the new law, using a range of sanctions from guidance and codes of conduct to unlimited fines and lengthy prison sentences.

At the forefront of enforcing the regulations will be new specialist trading standards “scambuster” teams, in which the government is investing £7.5m.

John Wright, chairman of the Federation of Small Businesses, said: “I welcome this new law. Legitimate businesses should no longer have to face unfair competition from firms who use underhand tactics to get ahead. These regulations will create a level playing field for all, allowing businesses to thrive based on merit and not on who is best at duping or pressuring consumers."

Gareth Thomas, consumer affairs minister, said: “Honest traders understand the value of treating customers fairly and they've had enough of losing profit to rivals using underhand tactics to get ahead.

“The Consumer Protection Regulations will deliver better protection for consumers, cut red tape and put in place a simpler and clearer consumer law that will be easier to interpret and enforce.”

For more information on the Consumer Protection from Unfair Trading Regulations, visit http://www.businesslink.gov.uk/unfairtrading.