The warning came after a ruling from the Advertising Standards Authority that British Gas Trading's advertisements for cut-price dual fuel offers had breached guidelines on truthful advertising. The ASA upheld nine separate complaints over BGT advertising.
Callum McCarthy, the director general of electricity and gas supply, warned that unless BGT's performance improved he could launch an investigation using his powers under the Competition Act which comes into force in March next year. Under the new Act, companies can be fined up to 10 per cent of their turnover for abuse of a dominant position.
Mr McCarthy also criticised BGT's record in dealing with customers who wanted to change supplier. "Despite warnings, BGT's performance failed to improve and Ofgem is concerned that the company's poor performance is damaging the reputation of other suppliers," Ofgem added.
British Gas said it was "extremely disappointed" to have been criticised by the regulator and pointed out that other suppliers had attracted many more complaints to the ASA. Mike Alexander, managing director of British Gas Trading, said BGT had had a major input into formulating marketing guidelines with the ASA. He said that as the market leader, it had more reason than any other supplier to be concerned about advertising. "In upholding decisions against British Gas, the ASA has in many instances, defined new rules for the advertising industry," he added.
Ofgem said that British Gas had now agreed to clear any new advertising in advance with an ASA advice team.