Consumer watchdog launches investigation into “sneaky, confusing” energy retailer tactics

A “super complaint” alleging “sneaky, confusing energy pricing tactics” by Australian electricity retailers has sparked an investigation by the national competition watchdog, amid concerns consumers are being deliberately misled about which energy plans to choose.

The Australian Competition and Consumer Commission (ACCC) has this week revealed it will investigate whether energy retailers are misleading consumers by promoting plans that promise savings or good value when they actually offer poor value.

“We are concerned that consumers may be misled or deceived by plan names or descriptions of plans that offer ‘savings’ that are not genuine, or that consumers may be discouraged from switching to cheaper plans that are available to them,” said ACCC deputy chair Catriona Lowe.

And while this statement may provoke a “well duh” response from many consumers and consumer advocates, formal recognition from the ACCC that this is a “significant or systemic market issue” is a big deal.

“The ACCC is satisfied that the designated complaint made by Choice (magazine) relates to a significant or systemic market issue that affects consumers,” the watchdog said on Tuesday.

“If the ACCC identifies conduct that may contravene the Australian Consumer Law following its investigation of the issues raised by this complaint, it may take enforcement action where appropriate. The ACCC may also prepare industry guidance or contribute to policy or law reform initiatives.”

The issue around retailer tariffs has become a critical one, given the extraordinary hikes announced by most retailers at the start of the financial year, well beyond the recommendations of the energy retailer.

They are causing consumer hardship, and putting the social licence for the green energy transition at risk, even if the issue is more about unfettered market power than it is about the switch of technologies from coal to green.

The ACCC investigation comes as a result of the new designated complaints framework in the Competition and Consumer Act 2010 (CCA).

This came into effect in May 2024 and is currently accessible to three designated complainants – Australian Consumers’ Association (Choice), Consumer Action Law Centre (CALC), and the Council of Small Business Organisations Australia (COSBOA).

The first ever designated “super’ complaint” – as they are also known – was lodged with the ACCC by the CALC, calling for a nationwide ban on unsolicited sales practices, including door-knocking and cold-calling.

Choice followed, in May, with its own first designated complaint alleging three “widespread concerning practices” by energy retailers, including prompts to switch better offers that refer to plans that do not appear to be available, or the customer is not eligible for.

The practices of using identical plan names to represent plans with different prices, and of using plan names and descriptions that refer to ‘savings’ for poor-value plans, were also singled out by Choice.

“Our complaint highlighted a number of energy plans with names and descriptions including phrases like ‘save’ or ‘saver’ that were more expensive than other plans offered by the same retailer,” the association said in a statement.

“In some instances, they were even more expensive than the retailer’s standing offer. Many consumers rely on these representations as indicators of value to inform their decision making, but we found that many of these names and descriptions may not reflect genuine value.

“In our opinion, the systemic nature of these practices means any breach warrants strong, court-based action to deter similar conduct in other complex markets.”

Better offer, but not better off

What is particularly galling is that some of the practices called out by Choice appear to have arisen from recent efforts of the Australian Energy Regulator to make it easier for consumers to find better value retail energy offers.

Under the Better Bills Guideline, which came into effect in 2023, residential electricity bills are required to include a “Better Offer” message at least every 100 days to alert customers to whether they can save money if they switch to a different plan with the same retailer.

These savings can be huge. For example, a family member – who has a rooftop solar system – was getting a message on their monthly electricity bill saying they could shave nearly $1,000 a year off their bill by changing to a different plan. With help – the family member is 82 – this change was made, but it took roughly 40 minutes on the phone with back-up assistance and careful supervision from a third-party.

But the ACCC says it will focus its investigation on whether or not consumers are being misled or deceived by energy plan names or descriptions of plans that offer “savings” that are not genuine, or are otherwise being discouraged from switching to cheaper offers.

“It is essential that energy retailers provide clear and accurate information about their energy plans so that consumers can make informed decisions when choosing an energy provider and plan,” Lowe said.

Lowe says the ACCC is satisfied issues around “Better Offer” messaging are being effectively addressed through review and law reform processes currently underway by the AER and the Victoria’s Essential Services Commission (ECS).

In May this year, the AER updated the rules to say retailers that re-use plan names are required to add the following information below any better offer message alerting customers to a cheaper plan: 

If this plan has the same name as your current plan, you are on an older version of the plan which has different rates. You can still save money by switching to a newer version.

Choice said this week that it welcomes the ACCC’s decision, which it says will “help address harmful systemic practices that make it very hard to know if you’re being ripped off” by your energy retailer. 

“We chose energy plans for our first super complaint because consumers are very concerned about the cost of electricity,” said Choice’s director of campaigns, Rosie Thomas, on Tuesday.

“Consumers are often encouraged to shop around in order to save on their energy bills, but that’s impossible to do if the information they receive from retailers is inaccurate, incomplete or designed to overwhelm.” 

“Choice is calling on the ACCC to take strong action against the energy retailers to send a clear message that misleading consumers about savings or value is unacceptable,” Thomas says.

“We are also pleased to see some of the other concerning energy practices Choice raised in its complaint will be considered as part of upcoming reviews by the Australian Energy Regulator and Victorian Essential Services Commission.” 

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