The ACCC has indicated increasing scrutiny on door-to-door marketing. Its recent action against Neighbourhood Energy Pty Ltd shows its commitment to make examples of companies which contravene the Australian Consumer Law when undertaking door-to-door marketing.

Background

In June 2011, Neighbourhood Energy, a Victorian electricity retailer, had enlisted the services of Australian Green Credits Pty Ltd (AGC) to provide sales and marketing services, including door-todoor selling. Representatives of AGC visited the premises of Mr Fahnle, Mr Alda and Ms Sing.

The premises of both Mr Fahnle and Mr Alda both displayed a notice stating ‘do not knock’*. Nonetheless, the AGC representatives knocked and:

  •  told both men that they were not there to try to convince him to change his retail electricity supplier
  •  told Mr Fahnle that he was being overcharged by his then current retail electricity supplier and
  • told Mr Fahnle that he had been zoned incorrectly for electricity supply

none of which was the case.

In relation to each of Mr Fahnle, Mr Alda and Ms Sing, the representatives failed to as soon as practicable or before starting negotiation to:

  • clearly advise that their purpose was to seek an agreement to supply retail electricity
  • advise they were obliged to leave immediately on request and
  • provide their name and address. In addition, the representatives failed to leave immediately on the request of Mr Fahnle and Mr Alda.

Unsolicited Consumer Agreements

The Australian Consumer Law (ACL) has particular requirements relating to unsolicited consumer agreements, which are agreements for the supply of goods or services to a consumer which are made as a result of negotiations conducted either by telephone or at a place other than the business or trade premises of the supplier, and in the circumstances in which the consumer did not invite the supplier to call or come to that other place.

The requirements include that the dealer (the person making the visit or call, or the person negotiating with a consumer):

  • can only call on a person between 9am and 6pm Monday – Friday, 9am and 5pm on Saturday and not on a Sunday or public holiday
  • must as soon as practicable and in any event before starting to negotiate:
    • clearly advise the dealer’s purpose is to seek the person’s agreement to a supply of the relevant goods or services
    • clearly advise that the dealer is obliged to leave the premises immediately on request and
    • provide information regarding the dealer’s identity
  • must leave the premises immediately on request of the occupier of the premises or the prospective consumer and not contact the prospective consumer for the purpose of negotiating an unsolicited consumer agreement for at least 30 days.

Where the dealer is not the supplier, and the dealer contravenes one of the requirements, the supplier is also taken to have contravened.

Outcome

In this case, both AGC and Neighbourhood Energy admitted contraventions of sections 74 and 75 of the ACL (containing the above requirements) and also section 18, which prohibits misleading or deceptive conduct. They agreed with the ACCC that the Court should make declarations that the contraventions had occurred and that the Court should order both parties to undertake corrective advertising and trade practices compliance programs. In addition, Neighbourhood Energy agreed to a pecuniary penalty of $850,000 and AGC agreed to one of $150,000.

Although the penalties were agreed as between the parties, the Court did address whether the penalties were appropriate. In doing so, the Court considered the following factors:

  • the size and financial position of the contraveners
  • the deliberateness of the contravening conduct
  • the participation of senior employees/management in the contravening conduct
  • the companies’ culture of compliance with the ACL as evidenced by education programs and/ or corrective measures taken in response to the contravention
  • the cooperation of the companies with the ACCC
  • the amount of loss or damage resulting from the contravening conduct
  • whether there was any similar prior conduct and
  • the deterrence, parity and totality principles.

Here, there was negligible loss or damage from the contravening conduct. There was no similar prior conduct, nor any knowledge by senior employees or management of the conduct until the ACCC intervened.

Both companies had taken the conduct seriously and had acted promptly to implement corrective measures, including investigation, the cessation of door-to-door sales until re-training had been undertaken, reviewing training material and policies and appointing compliance officers. Both companies also cooperated with the ACCC, which the Court noted was a significant mitigating factor, as a complex and lengthy hearing was avoided. One can only imagine the size of the penalty if these mitigating factors were not present.

Lessons

Door-to-door sales continue to be a focus of the ACCC. As noted elsewhere in the CCN, the ACCC is appealing the decision in the case of Lux Distributors. It has also recently commenced proceedings against EnergyAustralia Pty Ltd and four marketing and sales companies engaged by EnergyAustralia in relation to door-todoor selling which occurred between July 2011 and August 2012. It alleges that the sales representatives failed to meet the ACL’s requirements regarding unsolicited consumer agreements and made false, misleading or deceptive representations. EnergyAustralia had announced back in February this year that it would cease doorto- door marketing at the end of March 2013.

The penalties in this case were significant, despite the mitigating factors. The case emphasises the need for training in relation to the ACL requirements, including regular refresher training, and the benefits of having compliance programs, including relevant training, details of complaints handling, undertaking reviews and establishing reporting systems.

“Do Not Knock” stickers and door hangers are available from the ACCC.