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Small businesses increase use of TIO

29 February 2012

Businesses, like residential consumers, have a need for a free and independent dispute resolution service and are turning to the TIO in substantial numbers to seek assistance in resolving complaints.

The TIO handles complaint from small businesses on the basis that these consumers, like residential consumers, are less likely to have the resources to pursue a grievance with their service provider through the formal legal system, and therefore require access to an independent and free dispute resolution scheme.

Larger organisations are also more likely to seek resolutions that are beyond the scope of the TIO’s determinative powers.

In the last financial year, we recorded a 52 per cent increase in the number of small business complaints – 22,836 in 2010-11 compared to 14,955 in 2009-10. In the second half of 2011, we recorded 12,876 small business complaints. These complaints make up 13 per cent of all new complaints to the TIO.

One reason behind this increase in complaints could be the changes to the TIO’s jurisdiction on increased monetary limits. In May 2010 our powers to make binding decisions were increased from $10,000 to $30,000 and our powers to make recommendations were increased from $50,000 to $85,000.

However, the nature of how small businesses use telecommunications services is itself a contributing factor to this increase. Some online-only businesses rely on a functioning internet service to operate. Smartphones and wireless internet services have become critical to small businesses who need to operate “on the go” rather than be restricted to an office, factory or workshop.  

Not unlike the trends identified in overall complaints, the majority of new complaints from small businesses in the last financial year were mainly about mobile phone services (57 per cent).
The common issues raised in new complaints from small businesses in 2010-11 included claims of:

  • inadequate or incorrect advice about their service by customer service representatives (6,339 issues)
  • poor coverage and drop-outs on mobile phone services (5,874 issues)
  • service providers not acting on their promises to resolve complaints (5,158 issues)
  • inadequate or inaccurate information at the point of sale about a contract’s terms and conditions (3,149 issues)
  • disputes about the total amount of a bill (2,088 issues), and
  • financial over-commitment caused by inadequate spend management tools (1,083 issues).

The increase in the number and complexity of small business complaints has prompted us to reassess and refine what the TIO considers a small business. This has included research in to the practices of other Ombudsman schemes and discussion with small business experts. In the past, we would take into consideration how much a business would regularly spend on telecommunications services and what the amount in dispute was, but these were not indicative of whether a business was a small business.

During 2012, we will change our approach to focus on a range of flexible criteria. The primary criteria we will continue to use are:

  • the number of employees the company has (20 or less)
  • an annual turnover under $3,000,000

Even when these criteria are not met, we will consider factors such as:

  • the nature of the business
  • the issue in dispute, and
  • the ownership structure or management of the business.

The ownership structure of the business criteria takes into account how closely the business is run by owners or managers. For example, if they contribute most of the operating capital and are the principal decision makers of the business it is more likely the business is a small business. Other criteria we look include whether the business is owned and operated independently and whether the dispute is one that is typical for a small business.

All these criteria are flexible; for example we take into consideration if a small business relies on seasonal workers that may increase their employees during a period in the year or whether they are a small manufacturing business that employs more than 20 people. 

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