Utility giant npower in High Court bribery case

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Britain's third biggest energy supplier, npower, will today begin a High Court battle with one of its doorstep selling agents featuring allegations of bribery, breach of contract and excessive price rises.

Britain's third biggest energy supplier, npower, will today begin a High Court battle with one of its doorstep selling agents featuring allegations of bribery, breach of contract and excessive price rises.

Npower, which has six million gas and electricity customers, is seeking damages from First Contact, a sales agent based in Manchester, for allegedly trying to bribe a senior member of its sales staff. Npower claims that First Contact offered the executive £12,000 to help buy a new car if its contract was terminated in such a way that the agent would be eligible for a big compensation payment.

First Contact and its director, Chadhary Zulfiqur Khan, deny the allegation and say that the money was a loan. The sales agent is counter-suing npower for allegedly trying to put it out of business by putting up prices in the hope that First Contact would find it harder to sign new customers and so terminate the contract itself.

The case, which opens this morning in the High Court in London and is expected to last at least a fortnight, will cast a light on the controversial use by big energy companies of doorstep selling agents and the terms under which they are employed. Npower, which is owned by the German utility giant RWE, was ordered to tighten up its doorstep selling procedures in January 2001 after the energy regulator Ofgem received an "unacceptably high" level of customer complaints.

Disciplinary proceedings were subsequently brought against the npower executive who was allegedly bribed, but the executive resigned from the company before they were complete. The £12,000, which had been given to a car dealer as a down payment on a new BMW 7 series, was returned to First Contact.

Documents to be produced in court show that in 2003 npower set about trying to reduce the number of sales agents it used to sell gas and electricity to small- and medium-sized companies after running over-budget on commission payments.

The sales contracts were typically for two or five years with agents earning more commission the longer customers agreed to sign up. Npower's budget for paying commission to sales agents was £10.6m for the year as a whole but by mid-May it had already spent £7.4m of that and was paying sales agents almost twice what it had budgeted for each business customer being signed up.

First Contact claims that npower then deliberately tried to suppress sales by raising its prices, making the business less attractive and encouraging agents to end their contracts voluntarily.

Npower says that the price rises in 2003 - one in July of 8 per cent and another in August of 4 per cent - were the result of increased wholesale energy costs.

But in one internal e-mail, a senior npower executive told a colleague that he was "extremely concerned" that the first price increase had not resulted in a change in the pattern of sales. David Titterton, head of markets for npower's business services division, told a colleague in the e-mail dated 25 July 2003: "We have not as yet seen any material change in sales volumes on the five-year contract product from agents, unless we see a material change next week then we must introduce a further price rise with immediate effect."

In another e-mail sent in August 2003, another npower employee wrote to a colleague, saying: "Need to have information on why 2 price hikes as they may have a case for constructive dissmissal (sic) if they can prove that we put up the prices to stop them selling!!!"

Npower will argue in court that the employee in question was junior and nor was she a lawyer and that it was not possible to infer from the e-mail that she genuinely thought the company was doing anything which might constitute grounds for any sales agent to bring a case for constructive dismissal.

An npower spokesman, said: "The termination of our contract with First Contact was the result of conduct by First Contact which we believe represented a straightforward breach of contract. As a result of this we acted immediately to terminate the relationship.

"The fact that we are taking this legal action shows how seriously we take this issue. We believe we have a very strong case."