Watchdog targets energy companies in renewed push against misleading promotions

The competition watchdog has reaffirmed the energy sector as an area of interest, as it prepares to write to energy retailers putting them “on notice” over possible misleading promotions.

In a speech to the Consumer Action Law Centre’s energy workshop yesterday, Australian Competition and Consumer Commission deputy chair Delia Rickard said the commission was increasingly concerned about misleading conduct by energy retailers in regard to the promotion of energy plans.

“These concerns relate to the promotion of discounts and savings off energy use and/or supply charges under those plans,” Rickard said.

Rickard says comparability is an issue facing Australian consumers, as misleading advertising and promotions can make it difficult to distinguish what price the companies are really charging.

“While retail competition and choice have delivered many benefits, unfortunately it is a difficult and complex process for the average consumer to compare and decide on which energy plan suits them best,” she says.

Rickard told SmartCompany the letters to the energy retailers were likely to be posted in the next couple of weeks.

“It’s not a new area of concern – it’s something we’ve been concerned about for a long time. Rod Sims has talked about this issue in conferences dating back to 2011,” she says.

Rickard says the ACCC is concerned energy companies are disguising the “base price” of their services.

For the ACCC, many companies have come under scrutiny in the past year for misleading advertising and Rickard says the telecommunications and energy sectors are “ongoing priorities”.

“Lots of work has been done in these sectors to ensure good health competition,” Rickard says.

Energy services comparison company Energy Watch under the leadership of the now former chief executive and founder Ben Polis was targeted by the ACCC in 2011 for misleading advertising.

The courts found Energy Watch had claimed to compare rates across all energy retailers, when in reality it worked with preferred suppliers to secure low rates, collecting a commission for the service.

Energy Watch was fined $1.95 million after it was found to have deceived consumers in “a very serious way” by “sharp business practices”.

Hall and Wilcox partner Sally Scott told SmartCompany over the last two years there have been numerous multi-million penalties ordered against companies following ACCC action.

“The vast majority of these have related to businesses in the energy and telecommunications industries.

“Earlier this year the ACCC chairman Rod Sims identified a number of focus areas for 2013 and those areas included the telco and energy sectors, so there is no reason to believe the prevalence of cases against companies in those industries with high penalties won’t continue,” she says.

Scott says businesses in those sectors need to be “highly alert” to the issues of consumer law and act on the expectation their conduct will be scrutinised.

Ben Hamilton from Hall and Wilcox told SmartCompany it’s likely the ACCC will be more active in pursuing energy companies for misleading promotions now.

“Part of the ACCC’s role is to educate and they take that position very seriously by engaging with the industries often. If there is continuing non-compliance in the sector, they move into a phase of enforcement,” he says.

Another area of concern for the ACCC in regard to energy companies is door-to-door sales and businesses such as AGL and Origin have found themselves in the firing line over this controversial marketing practice.

Last week, Origin announced it was ditching the practice, as the Direct Selling Association of Australian said the energy company had been a victim of “draconian” penalties from the consumer watchdog.

Origin joins Energy Australia and AGL who ceased the practice in March after being fined $1.5 million by the Federal Court.