Just Energy subsidiary faces $7M in penalties from Competition Bureau

OTTAWA – The federal Competition Bureau says a subsidiary of Just Energy Group Inc. (TSX:JE) has agreed to pay $7 million in penalties, restitution and other costs related to complaints over its door-to-door water heater marketing practices in Ontario and Quebec.

The settlement with National Energy Corp, which operates as National Home Services and Services aux foyers, follows a finding by the bureau that sales staff were misleading customers about their identity and the purpose of their visits.

During the investigation, the bureau said it became aware of thousands of complaints received by other organizations, including the Ontario Ministry of Consumer Services, the Better Business Bureau and the Office de la protection du consommateur in Quebec.

Under the consent agreement signed by National and Just Energy Group Inc., National will pay $1.5 million in restitution to all current National customers obtained through door-to-door marketing since July 2008 in the form of a credit on their water heater rental bills.

It will also pay a $5-million administrative penalty and an additional $500,000 towards the bureau’s investigative costs.

The agreement also prohibits National from misleading consumers into believing their existing water heater is unsafe or that it is eligible for a no-cost upgrade and requires the implementation of a corporate compliance program.

“The bureau is pleased that this agreement will protect consumers from being deceived by representatives of businesses who falsely identify themselves in order to make a profit,” John Pecman, commissioner of competition, said in a statement accompanying the announcement.

“This type of behaviour will not be tolerated by the bureau and we will not hesitate to hold those responsible accountable for their actions.”

Earlier this month, the bureau announced consent agreements with two other companies in the water heater business.

Under the agreement, one of the companies, Reliance Comfort Limited Partnership, agreed to a $5-million administrative penalty and contribute $500,000 to the bureau’s investigation into what it called “anti-competitive water heater return policies and procedures aimed at preventing consumers from switching to competitors.”

In addition to the monetary penalties, Reliance was also required to take “certain steps to make it easier for customers to terminate their rental agreements and return their water heaters,” it said.

The settlement arose out of applications the bureau filed with the Competition Tribunal in 2012 challenging alleged anti-competitive practices against Reliance and privately held Direct Energy.

The bureau said it approached EnerCare Inc. (TSX:ECI) after learning it planned to acquire Direct Energy’s water heater business in Ontario.

EnerCare was not the subject of the bureau’s application regarding Direct Energy’s practices and had not engaged in any anti-competitive behaviour, it said. However, given its acquisition of Direct Energy’s water heater rental business, the bureau obtained commitments from EnerCare that put an end to what it called “Direct Energy’s anti-competitive behaviours.”

The bureau is continuing litigation before the tribunal against Direct Energy and is seeking, among other things, an administrative penalty of $15 million.

Meanwhile, Just Energy said that subsequent to the consent agreement it completed its previously announced sale of National, along with its water heater and HVAC home services business, to Reliance for $505 million, subject to adjustments including working capital balances.

Reliance, with headquarters in Toronto, employs more than 1,200 people and serves more than 1.6 million residential and commercial customers through operating branches across Canada.