A law firm planning to launch a “David vs Goliath” legal case against energy firms has called for hospitality businesses to get in touch to see if they may be eligible for compensation.

JMW Solicitors is set to take action against energy supply giants including British Gas, EDF, Scottish Power and E.ON on behalf of hundreds of businesses.

The claim centres on ‘hidden’ commission fees paid by energy companies to brokers who arrange high-cost deals with businesses, often without the customer's knowledge or consent.

These commissions can be concealed in energy bills and inflate the price of a customer’s tariff.

JMW said there were cases where brokers’ commissions made up a “significant portion of total energy costs of a business” and added large sums to their annual bills.

Any business that has used a broker to enter an energy contract in the past six years and was not properly informed about the broker receiving a commission from an energy provider may be able to bring a claim, JMW said. This includes businesses that have had to close.

Customers may be entitled to repayment of the commission plus interest, or able to claim damages for any losses suffered, JMW added.

Industry regulator Ofgem only made it a requirement for brokers to declare their commissions to ‘micro business’ customers, defined as firms with a turnover of less than £1.8m, in October 2022.

A 'national scandal'

JMW was engaged by Sacha Lord, night-time economy adviser for Greater Manchester, to investigate the issue, which he described as a "David vs Goliath moment".

Lord previously worked with JMW to force the government to drop its rule that hospitality venues could only serve alcohol alongside a ‘substantial meal' during coronavirus restrictions in 2021.

Hospitality trade bodies said last month that the average energy bill across the sector was up 81% since last year and triple the price it was in 2021.

Graham Small, partner in JMW's Commercial Litigation team, likened the scale of the issue to the PPI scandal, where millions of people were paid £26b in compensation after being mis-sold insurance between 1990 and 2010.

JMW plans to launch the legal case in the coming months and if successful, millions of businesses could be able to reclaim the commissions they paid.

Small said: “Often commissions were hidden in energy bills by being included in the customer’s tariff. In the more serious cases, these commissions are viewed as a bribe entitling customers to compensation.

“Taking into account the millions of firms across the country that used a broker, it is possible that total claims could run into many millions, if not billions.”

Ofgem is currently investigating poor behaviour by energy suppliers and is understood to be considering more formal changes to its rules

When questioned about the JMW legal case, an Ofgem spokesperson previously told The Caterer: “While as a regulator, we can’t unpick private contracts, we want to see commercially sensible solutions that help non-domestic customers, and we recently wrote to suppliers to ask them to show flexibility, and we will continue to press suppliers on this, while we review the regulation of the non-domestic market more broadly.”

Businesses that may have been affected should visit JMW’s website to see if they are able to register their claim.

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