October 7, 2020

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans


Financial comparison site iSelect has been ordered to pay $8.5 million by the Federal Court over accusations it misled customers choosing electricity plans.

Between November 2016 and December 2018, iSelect admitted it misled users over claims that it would compare all electricity plans offered by its partners and then recommend the most competitive plan.

In reality, iSelect’s commercial arrangements with electricity retailers restricted the number of plans that could be uploaded to iSelect’s system – meaning that the plan that was recommended to consumers was not necessarily the best price or the most suitable.

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans
iSelect compares a range of financial products from electricity plans to insurance. (iSelect)

Australia’s consumer watchdog the Australian Competition & Consumer Commission (ACCC) said it estimates that during this time period hundreds of thousands of consumers visited the website.

“iSelect was not upfront with consumers that it wasn’t comparing all plans offered by its partner retailers,” ACCC chair Rod Sims said.

“In fact, about 38 per cent of people who compared electricity plans with iSelect at that time may have found a cheaper plan if they had shopped around or used the government’s comparison site Energy Made Easy.

“iSelect received commissions from the retailers when those consumers selected a plan via the iSelect website or call centre.”

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans
An example of iSelect’s electricity plans. (iSelect)

The Federal Court found that iSelect misrepresented the price of some plans it recommended to almost 5000 consumers.

In some cases, due to technical errors, iSelect recommended electricity plans that underestimated the real cost by up to $140 per quarter.

“iSelect’s misleading conduct may have caused some consumers to switch electricity providers or plans on the basis of a price that was understated or without being aware that a cheaper plan was available,” Mr Sims said.

“It can be complex and confusing for consumers to compare prices and other features of electricity services in a bid to get the best deal for what often is a major household expense.

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans
Many Australians have seen a spike in electricity bills while working from home. (iStock)

“Comparison sites need to make it very clear if their recommendations are influenced or limited by commercial relationships.”

Users do not need to pay to use iSelect’s services; the comparison site is paid fees and commissions by its partner retailers when a consumer uses the service to purchase an energy plan.

In a statement to shareholders, iSelect said the concerning aspects of its service were caused by a coding error and customers were informed of the correct payable amount in “welcome packs”.

“The ACCC and iSelect made joint submissions to the Court in relation to the appropriate relief and the Court has declared, among other things, that certain statements appearing on iSelect’s energy website in the period 13 November 2016 to 6 December 2018 concerning aspects of its comparison service were, or were likely to be misleading,” iSelect told the ASX.

iSelect hit with $8.5 million fine over misleading customers choosing electricity plans
iSelect said there was no deliberate intent to mislead customers. (AAP)

“Because related disclosures were not adequate and similarly that in the period March 2017 to November 2019, as a result of a coding error iSelect had understated the amount payable under energy plans for a number of NSW consumers.

“The parties jointly submitted that the amount was corrected in welcome packs made available to those consumers who had statutory rights allowing them to walk away from plans if they wished to.”

iSelect said there is no evidence of deliberate intent to mislead customers.

“The joint submissions by the ACCC and iSelect acknowledged that there is no evidence that iSelect intended to mislead consumers or deliberately contravene the law,” the comparison site said.

“The joint submissions also acknowledged the corrective action taken by iSelect after it was notified of the ACCC’s concerns, including increasing the prominence of disclaimers on our website, as well as iSelect’s cooperation, including initiating settlement discussions, and its compliance program.”

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