The ACCC announced on Wednesday it had instituted proceedings in the Federal Court alleging that between June and November 2018, Sumo promoted 12-month electricity plans with low electricity rates and large ‘pay on time’ discounts of up to 43% to residential consumers, “while planning to substantially increase the prices charged to those consumers who signed up within a few months, or knowing it was likely to do so”.
The ACCC claims that Sumo represented to consumers that it would maintain, or not materially increase these low rates and consumers would get the benefit of the ‘pay on time’ discount for 12 months.
“However, in November 2018, Sumo substantially increased the underlying rates for certain consumers, by approximately 30 to 46 per cent,” the ACCC said in its statement.
“The ACCC alleges the price increases were in line with a pre-determined strategy, which Sumo had not disclosed to consumers. The ACCC also alleges that the price increases substantially eroded or eliminated consumers’ pay on time discount.”
“We allege Sumo enticed consumers to enter into electricity plans with the promise of low cost electricity prices, while planning a significant rate increase which meant consumers were charged significantly more for their electricity than they were led to expect,” ACCC Chair Rod Sims said.
“It is also part of the ACCC’s case that Sumo subsequently misled consumers when advising them that the price increases were due to wholesale energy cost factors including generation cost rises and “climate change and ageing assets forcing the closure of cheap coal fired power stations.”
The ACCC says Sumo used telemarking agents to cold-call residential consumers and promote its electricity plans, and claims that, acting on behalf of Sumo, the telemarketing agents represented they were independent and would perform a comparison of plans across a number of retailers, when in fact they were contracted by Sumo to sell Sumo plans.
“Electricity bills are a major household expense for many consumers,” Sims said.
“We allege that consumers were likely to have been convinced to switch to Sumo, acting on recommendations from purported independent consultants when in fact they came from Sumo telemarketing agents.”
The ACCC is seeking penalties, declarations, publication orders, compliance program orders, consumer redress, and legal costs.
As reported by iTWire, the telecommunications regulator, the Australian Communications and Media Authority (ACMA) hit Sumo Power in June with a $46,200 fine after it found the company could not show it had consent to conduct telemarketing to numbers on the Do Not Call Register.