What you need to know
- iSelect admitted to having misled consumers and breaching the Australian Consumer Law through its online energy comparison service.
- iSelect failed to disclose to consumers that not all available electricity plans were compared, and the plans it recommended were not always the cheapest or most competitive plans available.
- iSelect has been ordered to pay $8.5 million in penalties for making the false and misleading representations and post a corrective notice on its website.
What you need to do
- Operators of comparator websites must be transparent about how their comparisons are made and ensure that representations made on such websites are not false or misleading.
- Specifically, comparator websites should disclose if recommendations are being influenced or limited by commercial relationships with the companies being compared.
iSelect's Comparison Service
iSelect is a price comparator which offers a free comparison service of utilities to Australian consumers. iSelect's comparison service works by comparing energy plans made available to iSelect by retailers which iSelect has a commercial agreement with.
What representations were made?
The ACCC commenced proceedings against iSelect in April 2019, alleging that iSelect made representations in contravention of ss 18, 29(1)(g), 29(1)(i) and 34 of the Australian Consumer Law (ACL).
The ACCC and iSelect subsequently reached an agreement to resolve the dispute on the basis that iSelect admitted to having made two main representations, characterised by Justice Moshinsky as the "Plan Representation" and the "Price Representation".
The parties also provided the Court with a joint submission on contravention and relief and proposed consent orders that included a pecuniary penalty. At the hearing, the parties made submissions in support of the form of the orders, including the quantum of the pecuniary penalty, which Justice Moshinsky held to be an appropriate penalty to reflect iSelect's contraventions of the ACL.
Plan Representation
The first representation admitted by iSelect, was that between 13 November 2016 and 6 December 2018, iSelect made statements on its website representing to consumers that it would compare all of the plans available from its partner retailers in a consumers area and recommend the most suitable or competitive plan.
To the contrary, iSelect's comparison service:
- did not always include or recommend the most suitable or competitive plan in the consumers area; and
- failed to disclose that in some instances, cheaper or more competitive plans could be purchased either outside of iSelect, or through iSelect's call centre, which were not available through the comparison service.
Price Representation
The second representation admitted by iSelect, was that between March 2017 and November 2019, it represented to certain consumers that the price for an available plan was an amount lower than the price that the consumer would pay for that plan, in circumstances where due to a coding error:
- iSelect offered plans to some consumers that did not account for controlled load usage in the tariff rate; and
- those consumers were likely to incur costs for controlled load usage.
This error resulted in incorrect price quotations that were on average between $114.75 and $140.30 below what a consumer was likely to pay per quarter.
Pecuniary Penalty and Justifications
In circumstances where iSelect admitted to having contravened the ACL, the parties jointly proposed a pecuniary penalty of $8.5 million to the Court, comprising a $7.3 million penalty for the Plan Representation, and a $1.2 million penalty for the Price Representation.
In considering the adequacy of the proposed penalties, the Court considered factors including the benefits gained by iSelect from making the representations, the damage to consumers, iSelect's size and financial position, iSelect's previous run-ins with the ACCC and iSelect's co-operation throughout the proceedings.
Plan Representation Penalty
The Court considered the $7.3 million penalty for the Plan Representation to be appropriate because the contravening conduct may have diminished genuine consumer choice and had a high degree of visibility on iSelect's website for a long period.
Importantly, despite iSelect's website containing some disclosures that were located on offshoot webpages that could be accessed through a hyperlink, such disclosures were not prominent or proximate to the misleading statements. As a consequence of the representation, it was estimated that approximately 38% of consumers who used the comparison service may have been eligible for a cheaper plan.
Price Representation Penalty
The Court declared the $1.2 million penalty for the Price Representation as appropriate in circumstances where iSelect's failure to implement adequate mechanisms to prevent such an error was a "significant compliance failure". Thus, even though there was no evidence that iSelect deliberately made the representation, iSelect's failure to ensure that the code underlying its core business services was accurate, justified the penalty.
The Court also declared it appropriate to require iSelect to publish a corrective notice on its website setting out the misrepresentations made by iSelect and the associated penalties.
Lessons Learnt
The significant penalties imposed on iSelect are a stark reminder that comparison websites must be accurate and transparent about the way in which they provide their services to avoid misleading consumers.
Such websites must clearly disclose the basis upon which their recommendations are given, including the influence of arrangements with partnering retailers and the availability of more competitive products.
The Court's findings, also serve as a useful reminder that burying key terms about the limitations of an offering on linked pages is completely inadequate. Any limitations must be clearly brought to the attention of consumers and be prominent and proximate to any core representation.
Authors: Lachlan Wright, Lawyer; and Anita Cade, Partner.
