Energy suppliers Economy Energy and E (Gas and Electricity), along with consultancy firm Dyball Associates breached competition law, Ofgem has found.
The three companies have been fined £870,000 collectively by the regulator after they infringed chapter one of the Competition Act 1998.
Ofgem has today (30 May) confirmed that between January and September 2016 Economy Energy, E (Gas and Electricity) and Dyball Associates had an anti-competitive agreement preventing the two suppliers actively targeting one another’s customers through face-to-face sales.
The two suppliers were found to have shared commercially sensitive information in the form of customer meter point details.
Dyball Associates aided this arrangement by designing, implementing and maintaining software systems that allowed customer meter point details to be shared, and recruitment of each other’s customers to be blocked, Ofgem said.
Ofgem has fined E (Gas and Electricity) £650,000 and Economy Energy £200,000 (the latter fine reflecting Economy Energy’s financial position, including that it is in administration).
Meanwhile Dyball Associates has been fined £20,000 for acting as a facilitator.
The majority of the customers with both suppliers at the time were pre-payment meter customers.
Ofgem said such customers are less likely to switch than those on standard meters and and therefore more likely to be on a more expensive deal.
E (Gas and Electricity) and Economy Energy put forward an argument that they were a combined family enterprise, but this was not accepted by the regulator.
Energy suppliers typically compete to attract new customers by offering a better deal and the arrangement between the suppliers and consultancy firm undermined competition.
Anthony Pygram, director of conduct and enforcement at Ofgem, said: “Anti-competitive agreements are a serious breach of competition law and could cause widespread detriment and harm to consumers, especially those in vulnerable situations.
“E and Economy Energy agreed not to target each other’s customers with the assistance of Dyball Associates, leaving some customers potentially worse off by being unable to access deals from the other supplier.
“Customers should have an opportunity to switch to other suppliers and should not be prevented from doing so by anti-competitive agreements, and suppliers should all have an equal opportunity and compete on a level playing field with rivals.
“This enforcement action sends a strong signal to suppliers that we will take action and penalise those who undermine competition and do not act fairly.”
The decisions on the infringement and the penalties were made by members of the Enforcement Decision Panel (EDP), which was set up in 2014 and is independent of Ofgem.
The case originally opened in October 2016 and decisions to continue with it were made in December 2016 and April 2017.
The regulator then issued a statement of objections, under the Competition Act 1998 to the companies in May last year.
A statement of objections gives notice of a proposed infringement decision under the Competition Act to the parties being investigated.
A spokesperson for Economy Energy at the time said: “Economy Energy takes its compliance obligations very seriously and is disappointed by Ofgem’s annoucement.”
The company said it was reviewing the statement of objections and proposed to submit a “robust defence” to Ofgem’s allegations.
Citizens Advice said Ofgem’s findings of energy firms breaking competition law highlights the “clear need” for stronger licensing rules.
Gillian Guy, chief executive of Citizens Advice, said: “We’ve known for some time that suppliers who were unprepared and unsustainable were able to get into the energy supply market. Today’s action by the regulator shows firms that were willing to break the law were also able to get in.
“It’s especially troubling that the people affected were most likely pre-payment meter customers, who are more likely to be vulnerable or on low incomes and less likely to switch.
“Ofgem has taken steps to tighten the rules around who can get into the market, including a fit and proper person test. But this case shows a clear need for stronger rules on supplier conduct and close scrutiny of the management of firms.”