OFT threat to TV retailer

NIGEL COPE

The Office of Fair Trading has threatened to revoke the consumer credit licences of Colorvision, the Liverpool based television and video retailer, following a number of complaints from customers.

Shares in the company slumped 7p to 40p on the news though the company said it would issue a robust response to the notice. It has 21 days to submit a written or verbal case to the OFT.

Colorvision's managing director, Alan Tinger, said the OFT statement was "a complete bombshell". He said: "We do not feel we have been treated fairly. We will be making a very robust response." The complaints include accusations of misleading price information and question marks over the effectiveness of product repairs.

It is the second time Colorvision has run into trouble with the OFT. In 1993 the OFT said it had received 30 complaints from customers. Yesterday it said it had received a further 13 complaints between 1993 and December 1994. It also referred to 121 trading standards convictions between May 1989 and July 1995.

The "minded to revoke" notice from the OFT is a serious threat to Colorvision. Almost half its sales are made on credit terms, and finance agreements account for a significant proportion of profits. The removal of credit licences would push the group into loss and threaten the future of the business.

However it is believed Colorvision should be able to show that it has taken steps to improve its credit systems. Six of the 13 most recent customer complaints were from one shop, which is now under new management.

Colorvision pioneered a "management enterprise scheme", under which shop managers invest a sum of capital into a branch in return for a proportion of profits. The scheme is designed to motivate managers.