business owner wants a competitive rate when signing up for essential services such as gas and electricity but failing to look beyond cheap introductory honeymoon rates can come back to bite, as hundreds of small business owners found recently.
In February the Federal Court found Wesfarmers Kleenheat Gas had misrepresented the true ongoing cost of supplying bulk LPG to some of its customers. Those affected included cafes, laundromats, sporting clubs and a range of other, mostly small, businesses around the country.
Kleenheat placed many new or renewing small business customers on so-called “managed monthly accounts” without telling them they were receiving a honeymoon rate. Once signed up prices were gradually increased over a period of up to six months until they reached Kleenheat’s second, much higher preferred target price.
Other businesses, typically existing customers deemed not to be profitable enough, were placed on a “quick hit” list. When gas prices went up, Kleenheat would use the opportunity to add an extra increase on top of the normal price fluctuation.
When gas prices dropped, Kleenheat failed to pass on the full benefit to customers on its quick hit list, pocketing the difference. This also went on for up to six months until Kleenheat considered the particular account to be generating a more acceptable return.
Of themselves, these practices were not the basis of the Australian Competition and Consumer Commission’s complaints against Kleenheat, which ultimately resulted in the company offering refunds to customers totalling nearly $800,000.
Kleenheat of Australia is a good reminder to all small businesses to beware of anything that seems to have a “honeymoon” cost or a “new customer” price that only lasts for a short period of time.
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