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Regulator Moves To Apply Same Customer Protections To MLM Sales As Required For Door-to-Door Sales

Would Require Background Checks on All MLM Agents Conducting In-Person Sales

In-Person Sales Require Both LOA, TPV

September 26, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Illinois Commerce Commission's first notice order concerning retail electric supplier marketing rules would apply the same set of rules to all in-person sales, including door-to-door sales, multi-level marketing sales, and sales conducted outside the customer's home (such as at kiosks).

Adoption of a first notice order means the ICC will now submit the revisions to 83 Ill. Adm. Code 412 and 83 Ill. Adm. Code 453 to the Secretary of State to begin the first notice period required for rulemakings. The ICC will have to vote on the rules again before they are final.

The rules would define "in-person solicitation" as any sale initiated or conducted where the RES [retail electric supplier] agent is physically present with the customer.

"The Commission is not persuaded that door-to-door interactions require significantly more protections than other in-person contact, and some of the parties in this docket seem to imply that non-door-to-door interactions require no protection whatsoever. ICEA notes that many RESs market through affinity or peer-to-peer contacts whereby an agent solicits through family, business, or social networks. The Commission disagrees that these interactions need fewer protections than stranger interaction; in fact, it is reasonable to presume that a customer is more likely to rely on the statements of a 'friend of a friend' than a total stranger, which is all the more reason those interactions should require the same disclosures as those that are required for door-to-door. For these reasons, the Commission agrees with Staff that Section 412.120 should be renamed 'In-person solicitations' and the requirements apply to all face-to-face interactions," the ICC said

However, while the text is clear, the line is blurred when the ICC discusses concerns regarding its broad definition -- namely that apart from true MLM solicitations, the rule could ensnare customers who recommend their supplier to friends in order to receive referral bonuses. The ICC explains that the rule would not cover such interaction because no enrollment would occur (and the enrollment would be covered by rules applicable to other channels, such as online), but does this create a loophole that would allow MLM (and even cold calls) door-to-door sales that simply push customers to another channel to avoid the in-person rules, which, unlike other channels, have a two-step verification process (noted below)

"ICEA also suggests that Staff’s expansion of door-to-door would appear to regulate dinner conversation because it would now cover friends and family that recommend RES service to other friends and family in order to receive gift cards, bonuses, or discounts on their bills. The Commission disagrees that this sort of conversation would fall under Section 412.120 because there is no enrollment. Rather, a potential customer would still need to sign up with a RES online or call the RES directly. Therefore, the sale will actually be regulated by Sections 412.150 [direct mail] and 412.140 [inbound telephone], respectively. ICEA’s concern regarding the Commission’s authority over these kinds of friends and family interactions is unfounded; the Commission agrees it has none," the ICC said

While common and (generally) non-controversial for door-to-door sales, notable provisions that now apply to other in-person sales (namely MLM) include the requirement that sales agents wear an ID listing the RES agent's full name in reasonable size font, an agent ID number, and a photograph of the RES agent, and the trade name and logo of the RES the agent is representing

Again, while common for door-to-door, the proposed in-person rules now applicable to MLM provide that in the absence of local ordinances or regulations, RESs, and their agents, shall not conduct in-person solicitation at residential dwellings before 9 a.m., and after 7 p.m. or sunset, whichever is earlier.

Another mandated provision common for door-to-door, but unique for MLM, would be that the rules provide that RESs shall perform criminal background checks on all employees and agents engaged in in-person solicitation. The criminal background check shall be performed by an independent contractor that is a licensed private detective or a similarly qualified entity and the RES shall confirm that the independent contractor has performed a criminal background check on its employees or agents in accordance with this rule.

As intimated above, in-person solicitations that lead to an enrollment would require a Letter of Agency and a third-party verification.

The ICC declined to require audio or video recording of the entire in-person solicitation. However, the Commission noted that Staff encourages RESs that do not already use recording for in-person sales, specifically door-to-door, to pursue this practice, and the Commission agrees.

The provisions described above would only apply to residential and small commercial customers (under 15,000 kWh annually)

Docket 15-0512

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