Sumo Power to pay $1.2 million for misleading electricity plans

30 June 2021

The Federal Court has declared by consent that Sumo Power Pty Ltd (Sumo) made false or misleading representations in selling electricity plans to Victorian consumers and ordered it to pay $1.2 million in penalties, and to pay consumer redress to affected consumers.

Sumo admitted that between June and December 2018, it had misled consumers about how much they would pay for their electricity if they switched to Sumo, in breach of the Australian Consumer Law.

The Court declared by consent that Sumo had offered cheap rates and high ‘pay on time’ discounts to entice consumers to sign up to certain electricity plans, when in fact Sumo planned to, and did, materially increase the rates paid by customers who had received one to three monthly bills. 

In addition, when signing up consumers, Sumo represented that it would maintain the low rates, or not substantially increase them, for 12 months when in fact Sumo increased rates by between 28 and 43 per cent for certain consumers who had only been with Sumo for between one and three months. These rate increases substantially eroded, or even eliminated, the benefit of the large “pay on time” discount which Sumo had used to entice consumers to switch to Sumo in the first place.

The Court also declared that Sumo had represented to consumers that price increases were solely because of electricity generation costs caused by factors such as climate change, the closure of the Hazelwood power station, network upgrades and fees paid to distributors, when this was not the case.

“Electricity bills are a major household expense and Sumo’s offers enticed consumers to switch plans in the belief they were getting a better deal,” ACCC Chair Rod Sims said.

“Businesses must not mislead consumers about the prices they will pay for a product or service. In this case, Sumo Power advertised large discounts to get consumers to switch energy providers, and did not disclose to these new customers its plan to substantially increase prices in the near future which would effectively erode or eliminate those discounts.”

“The ACCC is extremely concerned by such behaviour,” Mr Sims said.

“Consumers are encouraged to shop around for their electricity plan, and can get independent information about electricity plans by visiting the government website Energy Made Easy.”

About 7,700 customers were affected by the rate increases, which on average added an additional $50 per month to their electricity bills.

The Court ordered Sumo to provide redress to compensate affected consumers for the price increase. Sumo will contact current and former affected consumers to offer the compensation within 6 weeks. Sumo has estimated that approximately $800,000 will be paid in redress to affected consumers. 

Many consumers switched electricity plans to Sumo after being cold-called by Sumo’s marketing agents. The Court declared by consent that Sumo had also misled consumers by representing that its marketing agents were from an independent company offering a comparison service of electricity plans, when in fact the agents were from a company engaged by Sumo.

Sumo admitted liability and made joint submissions with the ACCC to the Court in relation to penalties and other orders.

Background

The ACCC instituted proceedings against Sumo on 5 August 2020.

Sumo is an Australian owned energy retailer, which began operating in early 2015.

These proceedings relate to Sumo’s promotion of 27 to 44 per cent “pay on time” discount plans, which were promoted to residential consumers in Victoria from at least June to November 2018.

During the relevant period, Sumo contracted a number of telemarketing agents to sell Sumo’s plans. Sumo has since ceased using these agents.

Note to editors

The ACCC has been directed by the Federal Government to publish regular reports into the prices, profits and margins in the supply of electricity in the National Electricity Market.

More information about potential savings available to consumers on their electricity bills is available at the latest electricity market monitoring report.

Release number: 
96/21
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