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Ontario Energy Board Fines Summitt Energy Management $299,000 for Consumer Protection
Violations
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November 19, 2010
The Ontario Energy Board has issued an
administrative penalty and costs totaling up to $299,000 against Summitt Energy Management
related to sales agent activities that the Board found contravened the Ontario Energy
Board Act, 1998 (all dollar amounts Canadian).
The case against Summitt involved allegations that five of its sales agents had engaged in unfair practices while signing customers onto energy contracts.
A Panel of the Board ruled on the case following an extensive hearing, and determined that Summitt and its sales agents contravened the requirements of the applicable legislation, regulation, and Codes of Conduct.
An administrative penalty of $234,000 is intended to address the contraventions and is in accordance with Ontario Regulation 331/03, which sets out the criteria for determining the amount of the penalty set by the Board. The balance of the penalty represents costs of the Board's investigation.
The Board also ordered Summitt to procure an independent review and audit of the revised sales practices used by its retail salespersons, and ordered Summitt to file the result of the review and audit with the Board by January 15, 2011.
In cases where the Board made a finding of non-
The Board did not believe that suspending Summitt's door-
The Board's order cited a number of concerns regarding Summitt's marketing practices. For example, the Board found that, "[i]t was clear from the testimony of Summitt's salespersons that a few hours of training was not an adequate foundation for someone who is expected to go into homes to sell these very significant contracts to relatively uninformed consumers on the basis of price comparisons or promises of lower prices."
In particular, the Board expressed concern with Summitt's "two part" contract which included a "Registration Form," and a "Customer Agreement with Terms and Conditions."
"The initial contractual document was curiously entitled 'Registration Form,'" the
Board said. "This is the document that was signed by the prospective customer at
the doorstep. In Summitt's view, the execution of this 'Registration Form' creates
a complete contractual nexus with the customer once the separate Customer Agreement
with Terms and Conditions document was delivered. It is noteworthy that this initial
document is ambiguous as to its status as a binding contractual document. Certainly
the title of the document seems to create an impression that the prospective customer
is merely registering for a program, or signing up to receive further information,
rather than entering into a long-
Additionally, the Board said that the "Customer Agreement with Terms and Conditions" which the Registration Form references, "is also presented in a very ambiguous manner."
"The document looks like a promotional brochure intended to encourage parties to enter into a contractual relationship, and not as an integral, indeed critical, element of an existing contractual relationship," the Board said.
"From the evidence before the Board, it appears that the retail salespersons did
not refer to the Registration Form as a binding contractual document when selling
to customers and instead referred to it as an 'application' or 'registration'. The
Board heard repeatedly that the retail salesperson would fill in all of the information
on the form, often in advance of the door-
The Board also had "serious concerns" with the price representations contained in Summitt's brochures. "The trendlines in these brochures typically misrepresented the actual market price of the respective commodities at the time the sale was being made and illustrated a fixed price that was lower than what the customer was actually being offered under Summitt's program," the Board said.
"Another shortcoming of Summitt's comparative pricing information is that it did not take into account the Provincial Benefit," the Board added.
The Board also said that the required reaffirmation call was, "rarely described as
what it was intended to be -
Instead, the Board found that agents described the call as, "a confirmation that the retail salespersons had in fact attended at the house of the prospective customer ... [or] [i]n other instances it was described as a quality assurance kind of exercise where the performance of the agent would be vetted by the head office."
"It appears to the Board that the effectiveness of the reaffirmation call as a genuine cooling off device was fatally undermined by the fundamental misunderstanding created by the retail salesperson during the sale," the Board said.
Accordingly, "[t]he Board does not find this is to be a case of five rogue agents. As detailed above, a substantial contributor to the misunderstanding of prospective customers about the true nature of the contractual arrangement they were entering was not rooted in the actions of the retail salespersons, but rather directly in the organization of the sale devised and designed by Summitt itself. Further, the Board finds that while Summitt may have had, on paper, a compliance program, in all of the circumstances it fell far short of any reasonable standard in its operation," the Board said.
The Board's 56-
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