Mangled by the machine

Michael Prest reports on the murky squabbles in the photocopying industry

When Huw Williams received a call last month from a potential customer named June Mayer seeking letters of recommend- ation from clients of his photocopying consultancy, Copywatch, he was happy to oblige. An offshoot of an American company, Copywatch only started in Britain last year and Mr Williams was eager to build up the business.

But the real reason for the call illustrates why Nigel Griffiths, the competition and consumer affairs minister, is considering whether to request an inquiry into Britain's multi-million pound photocopying business. It also explains why one weary reformer called the industry a "snake pit" and why an inquiry by the Office of Fair Trading in 1994 failed to clean it up.

At stake is whether customers are paying too much for photocopying machines leased to them under complex agreements by zealous salesmen. The evidence suggests that many contracts could be a third or even a half cheaper. Government departments, including the National Health Service, could save millions of pounds a year.

"June Mayer" was actually Carmel Rowley, who works for the British Equipment Users Association. Mark Nadel, director of the BEUA and a long-time associate of Ms Rowley, admitted that she had used a false name to obtain information from Copywatch. He also admitted that he had posed as Paul Jones in a later call to a Copywatch associate, Derek Gillanders.

Mr Nadel defended the use of false names as the only way of obtaining information, comparing the practice to the anonymity of the Consumers' Association or the Good Food Guide when testing products or services. "It's quite normal," Mr Nadel said. However, the Consumers' Association said it did not use false names.

The BEUA says it is an independent educational and research organisation. It produces detailed information on photocopying and similar machines, which even big manufacturers such as Canon say they find useful. Mr Nadel said the BEUA had about 5,600 "registered supporters/members". Manufacturers and dealers can subscribe to a package of services, which include the association's magazine Customers Voice.

Last year Customers Voice published an article that was heavily critical of Copywatch, quoting extensively from an aggressive letter about the consultancy written by Xerox and first sent by Xerox to Copywatch clients in the US. Christopher Adams, company solicitor for Xerox in the UK, confirmed that the article had been shown before publication to Xerox in the US. He also confirmed that he had sent a copy of the letter to a prominent firm of City accountants, which Copywatch was wooing as a client. The attacks on Copywatch have caused alarms in parts of the photocopying industry because the consultancy has a good record of saving money for customers. Started in the US by Matthew Smith, the business came to this country last year and operates here as a partnership between Mr Smith and Mr Williams. Copywatch renegotiates photocopying contracts, retaining 20 per cent of the savings as its fee.

One customer was the Forth Valley Health Board, part of the NHS in Scotland. Copywatch says that the deal it negotiated would have saved Forth Valley almost half its previous costs, or more than pounds 108,000 over five years - enough to pay for several nurses. At the last minute, however, the negotiations were taken over by the Central Services Agency, which negotiates on behalf of the whole NHS in Scotland.

Copywatch claims that the CSA used its paperwork as the basis for an agreement with a different supplier. The Scottish Office was unable to confirm whether the CSA had concluded a new agreement that cut the cost of the previous deal it had struck for NHS photocopier users. But the incident deeply concerns Mr Griffiths, not least because the Labour government is committed to slashing "bureaucratic waste" in the health service.

Mr Smith believes that the attacks on Copywatch by manufacturers and dealers arise from fears that consultants will pare profits further in an increasingly competitive business. Big manufacturers such as Canon, the market leader in Britain, buy services from the BEUA. Canon has sponsored a report in the current issue of the Customers Voice.

Eric Fordham, editor of the trade journal Business Equipment Digest and a veteran observer of photocopier wars, has lodged a complaint with the Office of Fair Trading, alleging that the BEUA is not a genuinely independent body. Mr Griffiths wants John Bridgeman, the Director-General of Fair Trading, to investigate the charge.

But the BEUA insists that it is fully independent. Mr Nadel said: "We are not being financed by manufacturers. No manufacturer has a say in anything the association does". He dismissed the complaint to the OFT as "sour grapes," claiming that Mr Fordham sees the Customers Voice as a competitor to his paper. The BEUA says the Customers Voice has a "semi- controlled" circulation of about 15,000.

Moreover, the BEUA has accused Copywatch of dubious practices, such as claiming on its letterhead and a website that it and Mr Smith are consultants to the OFT.

While Mr Smith did help the OFT with its 1994 report, he agrees that he was not paid by the office and that neither he nor his organisation have any continuing relationship with it. But Mr Smith has advised Mr Griffiths for several years, and the BEUA also accuses Mr Griffiths of breaking ministerial rules by allowing Copywatch to use his name as though it were an endorsement.

These murky squabbles, which partly stem from a long history of bad relations between Mr Smith and Xerox in the US, obscure the damaging practices that persist in the photocopying industry.

One is the use of the proposal sheet suggested by the OFT in its 1994 report. The sheet was supposed to set out clearly how much a contract would cost, breaking it down between the lease element, the service charge, and the cost of materials such as paper and toner.

But Mr Williams believes that eager sales staff still present the sheet as part of the overall lease agreement at the last minute, giving customers little time to digest the information.