Agreement with Direct Energy to resolve concerns in Ontario water heater industry

Direct Energy will pay $1 million penalty, despite exiting market

October 30, 2015 — OTTAWA, ON — Competition Bureau

The Competition Bureau has reached an agreement with Direct Energy Marketing Limited to resolve concerns that it restricted competition and limited consumer choice in Ontario’s residential water heater industry.

Under the terms of the consent agreement registered today with the Competition Tribunal, Direct Energy will pay an administrative monetary penalty of $1 million. In addition, the agreement encourages future compliance by requiring Direct Energy to establish and maintain a corporate compliance program in the event it re‑enters the residential water heater market in Ontario in the next ten years. While Direct Energy exited the market for water heater rentals in Ontario in 2014, the Bureau continued to pursue a resolution that addresses its past conduct.

In December 2012, the Bureau filed applications with the Tribunal against Reliance Comfort Limited Partnership and Direct Energy. The applications alleged that both companies had implemented anti‑competitive water heater return policies and procedures aimed at preventing consumers from switching to competitors. The Bureau alleged that, as a result of those practices, many customers were left with little choice but to continue their rental agreements, even if they wanted to purchase a new water heater or switch to another rental provider. For consumers who wish to purchase new water heaters, instead of continuing to pay rental fees, this is an important issue. The decision to purchase, rather than rent a water heater, can lead to substantial savings for consumers.

In November 2014, the Bureau obtained commitments from EnerCare Inc., the company which acquired Direct Energy’s water heater rental business in Ontario, that it would not continue Direct Energy’s alleged anti‑competitive policies and practices. At the same time, the Bureau announced that it had reached a consent agreement with Reliance that resolved the competition concerns raised by the Bureau. For further information on those resolutions, please see the related information below.

In December 2014, the Tribunal ruled that the Commissioner can pursue an order against Direct Energy, even though Direct Energy has exited the market.

In an effort to protect Canadians, the Bureau has been and continues to be active in the water heater industry by taking a number of enforcement actions to ensure that businesses comply with the Competition Act. In addition to the matters described above, other recent actions in this area include:

  • On November 17, 2014, the Bureau cleared Reliance’s acquisition of National Energy Corporation, subject to the terms of the consent agreement reached between the Bureau and Reliance, announced on November 6, 2014.
  • Under the terms of a consent agreement announced on November 24, 2014, National Home Services was required to pay $7 million for misleading door‑to‑door water heater promotions, which included money back to consumers.
  • The Bureau continues to investigate alleged deceptive door‑to‑door marketing practices by other water heater providers.

Quote

"We are pleased that Direct Energy has taken the steps necessary to address the competition concerns identified by the Bureau. The resolution announced today, along with the ruling by the Tribunal, send a clear message that companies cannot evade responsibility for contravening the Competition Act just because they have ceased the conduct or exited the market."
John Pecman
Commissioner of Competition

Related information

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