Warning to small business owners

Ross Greenwood speaks to Small Business Ombudsman Kate Carnell as 
the Small Business Ombudsman has received a raft over complaints in recent weeks about a company known as Viewble that is leaving small businesses thousands of dollars out of pocket. 

Introduction: Warning to small business owners

Ross Greenwood: Welcome back to Money News, right around the country. I want to give you something of what is a public warning, and the reason for that is if you’re a small business, you might be in a shop or a cafe, local business somewhere, just listen up, because there are people out there. There’s not one. There’s been a number of them over a period of time, the ACCC has closed some down previously, who might come in and try and sell you advertising deals.

Well, the latest one that we’ve come across is pretty serious, and there’s a raft of complaints. Hundreds of them have gone into the small business ombudsman in just the last few weeks.

Now, this particular one is through an organization that is called Viewble. Now, it’s spelled V-I-E-W-B-L-E and it’s got another associated business that appears to have now gone broke or gone out of business, called The Shopping Network, but I’ll explain what happens. Base their target through salespeople, local businesses, they might get a region. Now when I found businesses last week, in fact, it was my colleague Clare Weaver at channel Nine, who first came across this, and she just found a whole raft of people right around Australia.

We understand it may be, certainly not the hundreds, we understand it may be in the thousands of people. The deal is, they come to your business and they say, “Listen, we want to put in a screen up in your business and what we’re going to do is going to make a little bit of an ad about your business. What we’re going to do is going to put these screens in other neighbouring businesses and around this District an area. Your ad is going to play on those screens. Now, what we going to do is going to charge you $433 a month for the screens. That’s going to be $433 a month for the next three years, which other words works at the $15500.

In return what we’re going to do because your ads will be playing and other people be playing their ads on your television screen, our advertising side of our business, he’s going to give you $433 a month. You’re paying $433 a month. You’re getting $433 a month, and you’ve your screen with your ads and everybody else’s ads playing on them.” and you think, well, okay, that’s money in money out seems fine.

Problem is that the advertising side of the business closed. While you’re now got a system where you have to keep paying the $433 a month, you’re not receiving the $433 a month. Now the company, and when we spoke to them, basically said, we’re trying to find other advertising partner and we thought we’d actually– There’s one other thing about this. How did they make any money because if on one side, they’re giving you $433 a month and you’re paying $433 a month? Where was the money for them?

That is exactly what Kate Carnell, who is the small business ombudsman is having to try and work out now. Kate, good evening to you. Many thanks for your time.

Interview with: Kate Carnell, Small Business Ombudsman.

Kate Carnell: It’s a pleasure, Ross.

Ross Greenwood:  This is a circular arrangement of money. The problem is as soon as the advertising side of the business folds and they don’t have to pay out the $433 a month. Of course, they’ve probably received that money, I would have imagined, much of it up front from the lease company that’s probably taken on the leases for those television screens in those small businesses. Is that the way it works?

Kate Carnell:  Look, it would appear so because you’re absolutely right, if you pay $433 a month and you get a screen, and look the screens are probably worth about $1,000 really. Installed with Wi-Fi–

Ross Greenwood:  A bit of hardware, software. Yes, that’s right.

Kate Carnell:  You could, potentially, look at it $2,000, maybe, and as you rightly said it’s 15,500 that you pay over three years. There’s obviously some capacity for the finance company to be giving a payment back to Viewble. You assume that there is some– Well there must be some sort of an agreement there. The dilemma still comes, even with that payment back to Viewble.

The Viewble people have got to pay the sales people and they’ll be on a commission base. I’m assuming the people who make the ads, they’ll be wanting to be paid as well, and so on. There is something incredibly unusual happening here and it would appear the only way to keep this going was to keep the sales levels up to keep money coming into the business.

Ross Greenwood:  Well, this particular business, which has claimed is one of the biggest digital technology businesses in the world, which clearly is an exaggeration, also is set up, UK and US operations, presumably to keep the balls in the air. Just in regards number of complaints you’ve taken. How many are there now?

Kate Carnell:  Well, over 200 now. Ross, and that’s over a few weeks because what happened was one of the people who got burned here went on Facebook, and said, look I’ve got a problem here. Has anyone else got a problem? A few more people put their heads up and then a few more. Somebody said, well look why don’t you complain to my office, the Small Business Family Enterprise Ombudsman’s office and very quickly, a very large number of people have put their complaints in.

We think there could be over 2,000 businesses in this space. One of the things that really upset me on this one, is that a large number of the complainants are actually the children of the business people, and the reason for that, I’m talking about grown-up children of the business people. Is that the people who seem to be targeted are mum and dad businesses where often English is not their first language, and that’s the reason that the sons and daughters are putting in the complaints on behalf of their parents.

We’ve got people who running very small businesses. English isn’t their first language, and they’ve got pretty pushy salespeople, that are saying things like, look, you can stop this agreement at any time, you can’t, it’s a three-year agreement. There won’t be any cost, of course, there is, and so on. They’re being asked to sign a contract on an iPad, immediately, they’re not given a paper-based contract to have a look at, and fundamentally, what they end up signing is a finance agreement, and the agreement with Viewble/The Shoppers Network, the content provider.

They end up with two separate contracts, and the contract with the finance cut is 33 a month and that’s the bit that continues and the bit with Viewble, The Shoppers Network is the one that isn’t delivering on their part of the bargain and that’s to pay the $433 a month. This is really hitting people who are very vulnerable.

Ross Greenwood:  It’s a very interesting thing because we had heard numbers of upwards of 7,000, potentially, but that might also include people who are overseas in the United States or the UK, where this operation is also set up. Even on your number of 2,000, I can do pretty simple maths and if there are a 2,000 businesses affected, and there is $15,000 over three years for each of those businesses. That pretty easily comes to $30,000,000.

We’re talking about something that is quite significant and sizable. As I say, it’s one of those things that needs to either be fixed ASAP, or it needs to be stopped ASAP, that’s the whole trick about this. Just the other point, also, in regards to any businesses that might get such offers into the future, and as I said, there have been others in the past. There was another company on the ASX last year, called Big TV, that the went to God, as it were, it disappeared.

Well, the issue is it wasn’t a dissimilar type of an offering it was making to small businesses. You’ve just got to think, as you say once, twice, three times, four times, when these types of offers come along.

Kate Carnell:  That’s absolutely true, and really, the message, Ross, I know it’s simplistic, but don’t sign contracts on iPad’s that you haven’t had a chance to really look at or you haven’t had somebody, in your family or a trusted adviser to have a look at. You can get caught in these situations. We are following up here. We’ve certainly followed up. We certainly in communication, solid communication, with Viewble on this. Viewble are claiming they haven’t breached their contract in our view they have.

We’re now talking to the finance company because we’re interested in whether in the terms and conditions of the rental agreements that exist in this space, whether their finance companies have done due diligence, whether they were aware of the sales mechanisms that were in place here. There’s a range of things that we can and are doing to try to protect small business. Of course, we’re talking to the ACCC, as well, but at the end of the day, the $433 is continuing to be automatically paid by a range of these small businesses, a number of them we’ve spoken to, this might not seem like a lot of money to some people, but to these small businesses, this is a very large chunk of the profit.

Ross Greenwood:  Of their free cash flow. That’s exactly right.

Kate Carnell:  Of the free cash. Yes.

Ross Greenwood:  Kate Carnell as a small business ombudsman, I will tell you one thing, I did do. I did read one of those credit contracts. The other thing that the business got to watch, for anybody who’s listening who’s got one of these, and knows that they’re stuck for three years. At the end of the three years, you’ve got to give 90 days notice that you wish to cancel a credit contract, if you don’t give that 90 days notice, the credit contract will be considered to continue, and that 90 days notice you’ve also got to give notice that you’ll be returning the TV screen and all of the equipment to the leasing company.

So make certain that you do understand your obligations at the end of the contract as well. Kate Carnell, a small business ombudsman. Always great to have you in the

Image source: 2GB