In two recent ACCC actions, health insurance company NIB and energy retailer AGL South Australia have been dealt penalties following communications that the ACCC felt were misleading in nature.
In May 2015, NIB paid a penalty of $10,200 due a promotion it ran during December 2012 – November 2014 which promoted the waiver of a waiting period for extras on its combined Hospital and Extras health insurance product. The promotion represented that customer would "usually" or "normally" be required to wait 2 months to access the Extras. The truth was NIB had waived this 2 month waiting period for all customers for 23 months from December 2012.
This was a case of a "promotion" that represented a call to action – namely that customers must purchase the product by a specified or soon impending date – but in fact that end date kept rolling over for about 2 years. The lessons are similar to those represented in the ACCC's guidelines regarding "was" / "is" pricing. The "was" price (or higher price) needs to be one that the provider has sold the goods or services at within a reasonable period prior to the publication of the promotion. Otherwise, similar to the NIB infringements , the "was" price, or in this case the benefit of the waiver of waiting periods on certain extras, becomes part of the provider's standard offer and cannot be advertised or represented as a promotional offer.
In a decision of the Federal Court handed down on 29 April 2015, AGL South Australia was ordered to pay penalties of $700,000 and to offer affected customers refunds of approximately $780,000 for making false and misleading representations regarding the level of discount these customers would receive under its plans. AGL SA was also ordered to pay $300,000 towards the ACCC's costs, publish corrective advertising and maintain a compliance program for a further three years.
It was perhaps fortunate for AGL that the ACCC and AGL had agreed on the on the penalties before the court endorsed them, as the court said 'the serious nature of AGL's contraventions, its previous record of contraventions, and the fact that AGL has not disclosed all material bearing upon the full extent of its culpability may well have warranted the imposition of a higher penalty that that upon which the parties have agreed'.
The ACCC alleged that the consumers who took up the offer of a discounted electricity plan between January 2012 and July 2012 would have believed they were being charged at the "discount off" rates that generally applied to other residential consumers. In mid-July 2012, these customers were sent letters saying AGL would be increasing the rates under its energy plans. This price increase was not uniform but this was not clear from the letter. The letter relevantly stated that these customers would continue to receive their discount. Yet, due to the increase in rates, the same discount amounted to higher prices than customers who were supplied under AGL SA's standard retail contract or those who had subsequently commenced an energy plan with the retailer.
The court expressed surprise at the content of the affidavit filed by AGL Energy Limited's General Counsel which, amongst other things describes the review processes that were adopted by AGL for a letter of this nature. The court said '[i]t seems surprising that the false and misleading nature of the statements in the 2012 Rate Increase Letter was not recognised during the process of review described by [the General Counsel]. The fact that it was not appears to raise some concerns about the level of rigor involved in some aspects of the review.'
This is a timely lesson for providers to take into account the average consumer when conducting campaigns and consumer communications such as price increase notifications. The message is that the average consumer should not be expected to know there is a difference between a provider's standard retail rates and 'other' rates charged by the provider. When consumers assess the value of the discount or benefit offered it will always be the headline price or figure that is most powerful.
In bringing these two actions, the ACCC may well have had in mind that health insurance and electricity, like telecommunications, are commonly purchased services that are already difficult for consumers to compare. The lesson? Don't make it more difficult for them.
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