Competition Bureau Takes Action to Support Competition in Ontario’s Residential Water Heater Market

Bureau Seeks $25M in Penalties from Two Companies

OTTAWA, December 20, 2012 — The Competition Bureau announced today that it is taking action against Direct Energy Marketing Limited and Reliance Comfort Limited Partnership, two companies that rent water heaters to residential customers in Ontario.

Following an extensive investigation, the Bureau determined that Direct Energy and Reliance each engaged in practices that intentionally suppress competition and restrict consumer choice. Specifically, each company implemented water heater return policies and procedures aimed at preventing consumers from switching to competitors. This anti-competitive conduct affects consumers, other rental water heater companies, and businesses that sell water heaters, such as home improvement centres.

Currently, when Direct Energy or Reliance customers wish to switch to another provider, they must contend with a number of practices and procedures intended to frustrate the return process for their rented water heaters, including:

  • a requirement to call to obtain authorization to return a rented water heater;
  • aggressive retention tactics during these calls;
  • restrictions on when and where water heaters can be returned; and
  • unwarranted fees and charges.

"These tactics are denying consumers the benefits of competition," said John Pecman, Interim Commissioner of Competition. "Many customers have been forced to continue their rental agreements with either Direct Energy or Reliance, even if they want to switch to another provider, because of the anti-competitive practices we found in our investigation."

To restore competition in the market for residential water heater sales and rentals, and to protect consumer choice, the Bureau filed two applications with the Competition Tribunal today, seeking orders prohibiting Direct Energy and Reliance from engaging in further anti-competitive conduct. In addition, the Bureau is seeking administrative monetary penalties of $15 million from Direct Energy and $10 million from Reliance.

The Bureau's two applications were filed under the abuse of dominance provision of the Competition Act.

Copies of the Bureau's applications will be available shortly on the Competition Tribunal's website.

This is the second proceeding the Competition Bureau has commenced against Direct Energy or its predecessor. In 2002, following a Bureau investigation, the Competition Tribunal prohibited similar conduct by Enbridge Services Inc., now Direct Energy, under a 10-year consent order. The Bureau's investigation determined that Direct Energy re-engaged in similar conduct after the consent order expired in February 2012.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.


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