Problem Identification
In 2011, the ACCC identified significant numbers of consumer complaints related to door-to-door trading practices by energy retailers, including practices targeting consumers experiencing vulnerability and disadvantage. The complaints revealed potential Australian Consumer Law (ACL) concerns around misleading conduct and representations, failure to comply with requirements for unsolicited consumer agreements, harassment and coercion, and unconscionable conduct. The ACCC made this work a priority, which was announced publicly.
The complaint data had limitations, so it was necessary to better understand the scope of the issues. The ACCC commissioned a market research company, Frost & Sullivan, to conduct targeted research and interviews in connection with door-to-door sales, including with companies that conducted door-to-door sales (whether directly, or outsourced through third party marketers), and with current and former door-to-door salespeople. The scope of the research report was not limited to energy retailing and examined a range of other sectors that used this sales method.
Frost & Sullivan’s report provided the ACCC with a clearer picture of the scope of the problems, and informed our integrated compliance and enforcement approach. It revealed that 75% of door-to-door sales in Australia related to energy services and these sales methods were highly profitable for the sector. It identified questionable practices that targeted vulnerable consumers and identified that commission-based remuneration schemes encouraged aggressive and misleading practices by selling agents to convert sales. The report also formed part of the compliance side of our approach, as it was published it in order to help communicate the nature and extent of the harm in this area.
Integrated compliance approach
The various research, compliance and enforcement steps of the project happened in parallel, rather than being linear. For example, investigations that led to the enforcement outcomes (noted below) had commenced at the same time as the research stage so that the work progressed efficiently as possible. The ACCC also sent correspondence to various industry participants at the start of the project to put them on notice to improve their compliance.
Following the finalisation of the research report the ACCC developed specific consumer education initiatives to help address problematic behaviour by businesses identified in the report and the ACCC’s own enforcement investigations. These initiatives included:
- Creating “Do Not Knock” stickers and door hanger postcards for consumers’ homes. This initiative was developed jointly with the Consumer Action Law Centre.
- Developing the “Knock! Knock! Who is there? guide to give consumers information about their rights when approached by an unsolicited salesperson. The guide was also translated into 14 languages other than English.
- Publishing the Frost & Sullivan Report to increase industry compliance messaging, consumer education, and overall awareness of the issues and the harm.
To reinforce the education and compliance messaging, the ACCC also achieved several enforcement outcomes for misconduct by energy retailers and their contracted marketers. These actions were strategically selected – some reflected issues common across the industry; some were pursued to establish legal principles that could be used as part of the broader strategy (eg. AGL determination in relation to the legal impact of a Do Not Knock sign); and some gave the ACCC the opportunity to pursue unconscionable conduct allegations that reflected the seriousness of the conduct (eg. Australian Power & Gas). They included:
- penalties imposed in court proceedings the ACCC took against Neighbourhood Energy and its marketing contractor; AGL Sales, AGL South Australia and their marketing contractor; EnergyAustralia and its marketing contractors; Australian Power and Gas; and Origin Energy and its marketing contractor.
- enforceable undertaking accepted from Lumo Energy, and enforceable undertaking accepted from, and infringement notice penalties paid by, Red Energy.
Leverage strategy
The ACCC responded to a number of media enquiries and worked closely with a number of consumer groups, which assisted in achieving significant coverage of our educative and compliance messaging across all forms of media, and distribution of the educative materials amongst stakeholder groups. Following the conclusion of each enforcement matter the ACCC released a media statement that not only amplified the compliance messaging via the enforcement outcome, but also reminded the public of the educative materials and messaging.
The ACCC’s focus on energy door-to-door selling resulted in increased consumer awareness about their rights, as well as changed industry practices, including improved ACL training for all staff involving in sales and marketing. Some energy retailers (including 3 of the major retailers, Origin, AGL, and EnergyAustralia) even decided to withdraw from door to door selling due to the ongoing risks of misconduct from the practice.
Over the 2011 to 2014 period, the ACCC and state energy ombudsmen experienced significant decreases in energy door-to-door marketing complaints as a result of the project. For example, ACCC contacts about energy door-to-door marketing dropped from peaks of around 25 and 30 per month across 2011, 2012 and 2013 to around 11 per month in 2014. Obviously some of this decrease was due to some retailers ceasing door to door marketing altogether in mid-2013. Nevertheless, complaints numbers about other energy retailers also eventually decreased by 2014.