Home cinema - Auctionworld

The TV channel that shopped until it dropped
(Filed: 28/11/2004)

The sudden demise of Auctionworld has left thousands of viewers out of
pocket and raised vital questions about who is protecting consumers in the
fast-changing world of multi-channel broadcasting. Guy Dennis reports

On a cold autumn night 10 days ago, the mood was tense in the studios of
Auctionworld, the television shopping channel. The day before, the company
had been fined £450,000 by Ofcom, the media regulator, which was also
threatening to take away the channel's broadcasting licence.

Nonetheless, the presenters continued to reel off their spiel and do what
Auctionworld had done since it was launched on Sky and NTL's cable network
in November 2001 - flog everything from plasma-screen televisions to loose
diamonds.

None of the staff could foresee that their evening would end with them
drowning their sorrows in The Anglers, the pub near Teddington Studios,
where the channel was produced. But that is what happened after the
executive in charge of production suddenly announced that the live show was
going off air.

Last Tuesday, Auctionworld collapsed into administration with huge debts of
£14m. About 300 staff at the channel are likely to lose their jobs. The
Ofcom fine, the highest of its kind handed out by the regulator, was the
final straw for a company that had been plagued by erratic management and
that recently paid its staff late.

"People in the company worked tirelessly. The problem was that it was run by
cowboys," says one former employee.

Auctionworld was a television shopping channel with a difference. Goods and
guide prices were introduced by the presenters, who at first included Nell
McAndrew, the model, who later quit. Viewers called in on a premium-rate
phone line costing 60p a minute and placed bids for the goods, hoping to
snatch a bargain.

The goods may have been enticing, but Ofcom's damning report into the
company tells another story. The regulator rapped Auctionworld for an
"unprecedented" number of complaints - about 900 - and for breaching a host
of broadcasting and advertising guidelines. In many cases, the company
simply failed to deliver goods to customers.

Ofcom also slated Auctionworld for issuing misleading guide prices.

According to PKF, the administrators, about 17,000 customers who bought
goods are still waiting for them to be delivered, while another 10,000 are
owed refunds after returning products. Auctionworld is also being
investigated by trading standards officers in Hertfordshire, while the local
fraud squad is waiting for PKF's reports to decide whether it should
investigate.

The company's collapse is a lesson in how the development of multi-channel
television has lowered the barriers to entry in the broadcasting industry,
creating the potential for commercial catastrophe.

One of the most striking aspects is the apparent faith that people placed in
the service and its guide prices. One complaint to Ofcom involved a customer
who bought jewellery for £14,000 that was later valued at just £500. In
another case, Ofcom found that loose diamonds valued by Auctionworld at
£19,360 were actually worth £3,580.

So why were people prepared to pay so much for goods that they had never
inspected?

One answer is provided by Martin Robertson, who runs his own business in
Hatfield fixing commercial waste containers. In October he paid £135 for a
digital camera from Auctionworld, which was intended as a Christmas present.
It still hasn't arrived, and he doubts it ever will. Robertson's camera cost
far less than consignments of diamonds, but his views are likely to resonate
with other customers.

"The way Auctionworld has operated seems almost like a fly-by-night shop
that sets up and disappears. It's not what you expect on national
television," he says. "You assume that a company on TV has some reasonable
backing behind it."

This assumption, as Robertson knows to his cost, may have been reasonable
when there were just four national television stations, but is dangerous in
a world of dozens of TV channels.

PKF has suggested that Auctionworld had been insolvent for some time. The
most recent accounts filed at Companies House, for the year to the end of
March 2003, show that Auctionworld's losses increased to £2.8m from £2.4m
the previous year.

The company attracted complaints soon after its launch three years ago.
Within two months the Independent Television Commission (ITC), Ofcom's
predecessor, had received 50 complaints from disgruntled customers.

Former staff paint a picture of a company that lacked accountability. "Blame
was always getting passed on. If things weren't getting delivered, it was
the Royal Mail's fault," says one former employee.

Ofcom's report agreed. In relation to breaches of customer service, a
striking paragraph declares: "Auctionworld blamed all its past difficulties
on a succession of problems, each said to have been beyond its control, such
as deliberate computer sabotage . No independent verification of these
problems was offered and Ofcom was invited to rely upon assertions by
Auctionworld's management."

Last week George Spitaliotis, who ran Auctionworld and was its largest
shareholder, could not be reached for comment.

Suzanne Noble, an experienced public relations consultant in the television
industry who worked for Auctionworld for several months before a
disagreement over her fee, says that Spitaliotis appeared to have no
experience of selling goods in the kind of volumes that television shows can
generate.

"It quickly became apparent that they didn't have a clue," she says. "They
didn't appreciate the potential for people to return goods. And they were
selling rings. Well, obviously, they're often not going to fit - people have
different-sized fingers. So all these people were trying to return rings. I
mean, that's why, on television, people sell things like DVDs because they
simply do what they say on the box, but Auctionworld just didn't understand
that."

Noble argues that the growth of multi-channel television has opened up the
market, allowing new channels with little experience and limited financial
backing to broadcast. "It just goes to show what happens when you have
digital channels and don't check into their backgrounds," she says.

Auctionworld had a licence awarded by the ITC, whose role has been taken
over by Ofcom. As a result, Sky, which has a so-called open-platform
agreement, had to carry the service. NTL, the cable network, carried it as
part of a business agreement.

Auctionworld's collapse is likely to raise questions about the way that
broadcast licenses are awarded and supervised in future.

When Auctionworld was launched, it promised that it would be "a world away
from the `sell it fast, flog it cheap' approach adopted by other channels".

Unfortunately for its customers, this claim was all too true.

http://www.money.telegraph.co.uk/mon...28/ixcoms.html