The Litigator
The Litigator
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Reliance scalded by $5 million penalty

Hot water heater rental supplier Reliance Comfort Limited Partnership has agreed to pay a $5 million fine and to change policies that made it difficult for customers to switch to a competitor, in a settlement reached with the Commissioner of Competition on November 5, 2014.

EnerCare Inc, another heater rental supplier that has acquired Direct Energy Marketing Limited’s Home and Small Commercial Services, has also made a commitment to the Competition Bureau to change its policies to make the return process easier for the customers.

Reliance To Pay $5 Million in Penalty 

In 2012, the Commissioner filed applications with the Competition Tribunal alleging that Reliance and Direct Energy engaged in anti-competitive practices by implementing water heater return policies that made the return process difficult and prevented customers from switching to competitors.  The Commissioner alleged that both companies used tactics such as:

  • requiring customers to obtain authorization before returning a rented water heater;
  • refusing to deal with other suppliers who return customers’ water heaters on their behalf;
  • unreasonably restricting when and where water heaters can be returned;
  • engaging in anti-competitive retention tactics; and
  • imposing unwarranted fees and charges on customers seeking to switch to another provider or terminate their water heater rental contracts.

These tactics forced the customers of Reliance and Direct Energy to continue their rental agreement even if they wanted to purchase a new water heater or switch to another rental provider that offered substantial savings, the Commissioner claims.

Under the consent agreement, Reliance agreed to pay a $5 million administrative monetary penalty (fine) and $500,000 for the Competition Bureau’s investigation costs.  Reliance is prohibited from engaging in practices described above and is also required to take steps to make it easier for consumers to terminate their water heater rental agreement.

EnerCare Committed Change Heater Return Policies Following Direct Energy Acquisition

Following EnerCare’s acquisition of Direct Energy in October 2014, the Bureau approached EnerCare and obtained written commitments from EnerCare to change its existing return policies. These commitments include:

  • no longer requiring customers to obtain an authorization number before returning a rented water heater;
  • honouring agreements whereby a new supplier can terminate a customer’s account on his or her behalf and return the old water heater; and
  • opening new return depots to facilitate the return of its water heaters

EnerCare was not involved in the investigation and application against Direct Energy, and has not engaged in any anti-competitive behaviour.

Litigation Against Direct Energy Continues

The Commissioner’s abuse of dominance case against Direct Energy will continue. The day after a 2002 consent agreement entered into by its predecessor, Enbridge Services Inc., expired, Direct Energy implemented restrictive return policies and unfair charges to consumers, to make it difficult for consumers to switch to another provider, the Commissioner alleges. The Bureau is seeking from Direct Energy, among other things,  a $15 million administrative monetary penalty (fine). The application is scheduled to be heard beginning on March 2, 2015.

Wendy Sun
Affleck Greene McMurtry LLP

Wendy Sun

Wendy Sun is a former associate of Affleck Greene McMurtry LLP

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