Policy report: Coercion and harassment at the door Consumer experiences with energy direct marketers
Since the introduction of full retail contestability in the Victorian energy market, Consumer Action Law Centre (Consumer Action) and the Financial & Consumer Rights Council (FCRC) have received numerous complaints from consumers, financial counsellors and other community support workers about the marketing practices of energy retailers. The Energy and Water Ombudsman Victoria (EWOV) also continues to receive high levels of complaints in relation to marketing practices. Complaint levels have largely maintained or increased, despite the existence of consumer protections relating to marketing, both in fair trading and energy regulation. To further understand the nature and types of complaints in relation to energy marketing, and to determine the extent that marketers are not complying with the law, Consumer Action and the FCRC have prepared this case study report detailing a range of consumer experiences with energy direct marketers.
This report has been prepared so as to contribute to two regulatory reviews currently being undertaken in the energy market. First, the Australian Energy Market Commission (the AEMC) is undertaking a review of the effectiveness of competition in energy markets in Victoria. The AEMC have expressly asked that stakeholders provide evidence about what is happening in relation to the marketing of energy. Secondly, the Ministerial Council on Energy’s (MCE) Retail Policy Working Group (RPWG) is considering the new national regulatory framework for energy consumer protections, including those that pertain to marketing. This report and its recommendations will be provided to both the AEMC and the RPWG for consideration in their respective reviews.
The findings demonstrate regular breaches of the Victorian Energy Retail Code and Energy Marketing Code of Conduct, identifying problems specifically with marketer conduct. The case studies indicate a range of misconduct in relation to marketing practice including:
- Misleading and deceptive conduct;
- Retailers switching customers without consent;
- Unconscionable conduct;
- Marketing to non-account holders; and
In addition, there are several cases which demonstrate marketers taking advantage of a lack of understanding on behalf of consumers including:
- Instances of consumers signing multiple contracts; and
- Retailer inducements.
The report confirms anecdotal evidence that marketing misconduct is wide spread, and that marketers are regularly taking advantage of consumers, particularly vulnerable, disadvantaged and culturally and linguistically diverse consumers.
Many energy retailers believe that direct marketing, especially through door-to-door sales, is necessary to interest consumers in what is largely an uninteresting product. Regulators appear to believe that direct marketing is necessary for markets involving ‘relatively low involvement products such as energy’ and that such marketing is necessary for effective competition. However, the regular occurrence of marketing misconduct demonstrates a failure of effective competition. As this report submits, marketing misconduct prevents effective demand side participation that is necessary for effective competition.
Direct marketing, particularly when marketers are employed on a commission sales basis, inherently involves high pressure sales tactics. The inability of consumers to take time to consider an offer, or shop around to compare the offer being made, means that consumers are unable to drive competition by making choices that best suit their needs and, as recognised by the AEMC, customers rely heavily on the offer summaries and product information statements that are provided by the marketing retailers themselves. Effective demand side participation is essential for effective competition and can not be achieved through the marketing techniques currently being employed by energy retailers.
The report also considers the regulatory framework for the marketing of retail energy in Victoria, and considers whether it should be strengthened in the move to new national regulations. A summary of the recommendations follows.
To read our full submission, please click: Coercion and Harassment at the Door – Energy Marketing in Victoria.
 Energy and Water Ombudsman (Victoria) (EWOV), Resolution 24 – January to June 2007, October 2007.
 Australian Energy Market Commission (AEMC), Review of the effectiveness of competition in retail energy and gas markets in Victoria – Issues Paper, June 2007, p 18.
 AEMC, Review of the effectiveness of competition in retail electricity and gas markets in Victoria – First Draft Report, October 2007, p 66.
 As above.