The ACCC has released a draft determination proposing to reject Energy Assured Limited's proposal (made on behalf of electricity and gas retailers) to adopt and comply with a proposed scheme to self-regulate door-to-door energy sales (the Scheme).

The Scheme is intended to improve the standard and effectiveness of door-to-door marketing of energy, supplementing existing legislation and regulations that govern the area.

The ACCC, while expressing support for the objectives of the Scheme and for industry self-regulation, was not satisfied that these objectives would be realised in the Scheme's operation.

In particular, the ACCC was concerned that energy retailers who benefit from the activities of door-to-door sales agents would not be sufficiently accountable for the actions of the agents they employ.

What is the proposed Scheme?

Energy Assured Limited is a non-profit company limited by guarantee, established to provide an energy marketing standards compliance and accreditation platform to energy retailers and marketers. Its founding members are the Energy Retailers Association of Australia Limited (ERAA), Australian Power & Gas Pty Ltd and AGL Energy Limited. It was contemplated that the vast majority of energy retailers and energy marketers would become members of the company.

The Scheme involves standardised training and recruitment practices, the tracking and registering of door knockers, an independent complaints process, compliance auditing and potential sanctions against members and sales agents whose sales practices generate concerns in the community. It consists of a constitution, code of practice, procedures and guidelines, and complaints process. It was developed from a similar scheme in operation in the United Kingdom.

Why was the Scheme developed?

Energy retailers rely predominantly on door-to-door marketing for the majority of their new customers.

Door-to-door energy sales are currently regulated under the Australian Consumer Law and under state and territory energy specific legislation. State and territory energy specific legislation will be replaced by the national energy retail law and rules, currently scheduled to commence in participating states and territories in July 2012.

Despite these existing regulatory regimes, there has been some media concern and regulator scrutiny regarding door-to-door sales practices in the energy industry. In addition, the Office of the Victorian Minister for Energy specifically asked that the ERAA establish a voluntary self-regulatory code of conduct for the door-to-door marketing of energy.

The Scheme is therefore intended to supplement existing legislation and regulations.

Why was ACCC authorisation necessary?

ACCC authorisation can grant immunity from legal action for conduct that might otherwise breach the Competition and Consumer Act 2010 (Cth). Authorisation was sought for the Scheme because the Scheme may have conflicted with the cartel provisions and other anti-competitive provisions of this Act.

Why did the ACCC reject the Scheme?

The ACCC does not propose to authorise the Scheme as it is currenty framed because it was not satisfied the Scheme would achieve its objective of improving consumer confidence in the electricity and gas industries.

The ACCC, while expressing support for the objectives of the Scheme and for industry self-regulation, was not satisfied that these objectives would be realised in the Scheme's operation.

The ACCC's reasons included:

  • the proposed Scheme does not hold energy retailers sufficiently accountable for the actions of the agents they employ
  • the ACCC was not confident that the sanctions applicable for breaches of the Scheme are sufficient to disrupt the incentives for both sales agents and energy retailers to engage in unfair selling practices to maximise their financial interests
  • the information provided to consumers about their legal rights falls short of existing regulatory obligations, and may confuse consumers about their rights.

Next steps

The ACCC is seeking further submissions on the Scheme.

Energy Assured Limited released a statement stating that it is considering whether to continue to pursue the application or withdraw it and abandon the Scheme.

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