Sumo Power fined $1.2M for misleading electricity plans
The Federal Court has declared that Sumo Power Pty Ltd made false or misleading representations in selling electricity plans to consumers, ordering the company to pay $1.2 million in penalties and consumer redress to affected consumers.
The proceedings against Sumo Power began on 5 August 2020, looking into their promotion of 27 to 44 per cent “pay on time” discount plans to residential consumers in Victoria from in 2018.
Sumo Power, an Australian-owned energy retailer which began operating in early 2015, admitted that it misled consumers about how much they would pay for their electricity if they switched over to them during the period of June to December 2018.
Between those months, the power company had offered cheap rates and high ‘pay on time’ discounts to entice consumers to sign up for certain electricity plans.
The company promised that it would maintain its low rates for twelve months. However, they increased their rates by between 28 and 43 per cent for customers who had only been with them for one to three months.
These rate increases voided the benefit of the large “pay on time” discount which the company used to entice consumers to switch to them in the first place.
It was also revealed that Sumo Power falsely told consumers that the price increases were caused by factors such as climate change, the closure of the Hazelwood power station, network upgrades and fees paid to distributors.
“Electricity bills are a major household expense and Sumo’s offers enticed consumers to switch plans in the belief they were getting a better deal,” ACCC Chair Rod Sims said.
ACCC Chair Sims explained that, under the Australian Consumer Law, businesses must not mislead consumers about the prices they will pay for a product or service.
By advertising large discounts to get consumers to switch energy providers and refusing to disclose to its consumers its plan to substantially increase prices in the near future, Sumo Power breached the Australian Consumer Law.
“The ACCC is extremely concerned by such behaviour,” ACCC Chair Sims said.
“Consumers are encouraged to shop around for their electricity plan, and can get independent information about electricity plans by visiting the government website Energy Made Easy.”
Sumo Power had also used marketing agents from a company they engaged with. These agents falsely presented themselves as from an independent company offering a comparison service of electricity plans.
Due to this fraudulent act, many consumers switched over after being cold-called by its marketing agents. The power company has since ceased using these agents.
About 7,700 customers were affected by the rate increases, which on average added an additional $50 per month to their electricity bills.
The Court ordered Sumo Power to provide approximately $800,000 in redress to compensate affected consumers for the price increase.
The company will contact current and former affected consumers to offer compensation within six weeks.
Sumo Power admitted liability and made joint submissions with the ACCC to the Court in relation to penalties and other orders.