Pennsylvania Retail Marketing Rules Include Broad Definition of Agent, Multi-Level Marketers Likely Included

A final rule adopted by the Pennsylvania PUC concerning marketing rules applicable to retail electric and natural gas suppliers features a broad definition of the term agent.

Link to PUC final marketing rules (start on p. 59)

Under the final rule, "agent" is defined as, "A person who conducts marketing or sales activities, or both, on behalf of a licensed supplier or suppliers. The term includes an employee, a representative, an independent contractor or a vendor. It also includes subcontractors, employees, vendors and representatives not directly contracted by the supplier who conduct marketing or sales activities on behalf of the supplier."

Note that no longer is an agent only defined as working on behalf of a single supplier.

"If a supplier is using an 'affinity group' to obtain customers and the individual members of that group are not being reimbursed for the enrollments they obtain, then it is not our intent to treat those individuals as 'agents' under this definition," the PUC said in an accompanying order.

Applying a host of new regulations and requirements applicable to agents (background checks, training, uniforms, identification, etc.) upon the members of such affinity organization(s) is, "impractical and unnecessary," the PUC said. "The expectation is that the members of the affinity group are enrolling members of the same group or individuals with which they have a personal relationship," the PUC said.

In its order, PUC specifically addressed multi-level marketing under the definition: "[I]f the individuals are being compensated for the customers they enroll and if they are approaching individuals outside of a group or personal relationships – including 'multi-level marketing' - then these individuals are more accurately described as an 'agent' under this definition and these regulations should apply"

Matters found this sentence confusing, and was unclear whether the aside inclusion of 'multi-level marketing' in brackets meant such marketing was included as "individuals [that] are more accurately described as an 'agent'", or instead that multi-level marketing was included within marketing within a group or personal relationships, and excluded from the definition of agent (similar to affinity marketing).

Asked for clarification, the PUC press office first noted the order's language provided that, "There may be scenarios where the applicability of these definitions and regulations may not always be clear. We ask all market participants to use good faith and reason when confronted with such situations, and to seek the guidance of Commission staff if needed."

Additionally, the PUC press office provided the following statement to Matters:

"We encourage that when in doubt – erring on the side of applying the regulation is usually the safest course. If the individual is being compensated for selling, they are probably an agent. If the individual is contacting someone outside of 'personal relationships,' that person is probably an agent. If the individual is part of a multi-level structure where they are being compensated, and maybe compensating others, that person is probably an agent."

Regardless of sales channel, agents are required that, upon first contact with a customer, "an agent shall identify the supplier that he represents."

"The agent shall state that he is not working for and is independent of the customer's local distribution company or other supplier" the final rule states.

The final rule requires that a supplier shall ensure the training of its agents on a variety of customer protection issues and laws.

Furthermore, "a supplier may not permit a person to conduct door-to-door sales and marketing activities until it has obtained and reviewed a criminal history record from the Pennsylvania state police and from every other state in which the person resided for the last 12 months. For a current employee or agent who conducts sales and marketing activities, a supplier must obtain a criminal history record not later than 90 days after the effective date of this regulation"

"A supplier may not hire a person as an employee or an agent for door-to-door marketing or sales who was convicted of a felony or misdemeanor when the conviction reflects adversely on the person's suitability for such employment," the final rule provides.

The supplier or supplier agent, "may not say or suggest to a customer that utility customers are required to choose a competitive energy supplier."

Any transaction that involves an agent, including door-to-door sales, must be verified.

When verifying a transaction that resulted from an agent's contact with a customer at the customer's residence, "the verification process shall be initiated only after the agent has physically exited the customer's residence, unless the customer agrees that the agent may remain in the vicinity of the customer during the verification process."

At the end of the verification process contact, "A customer shall be informed of the 3-business-day right of rescission of the transaction under §§ 54.5(d) and 62.75(d) (relating to disclosure statement for residential and small business customers) and the customer's rights under 73 P.S. § 201-7 (relating to Pennsylvania's unfair trade practices and consumer protection law).

The rules provide that a supplier shall limit door-to-door marketing or sales activities to the hours between 9 a.m. and 7 p.m. during the 6 months beginning October 1 and ending March 31, and to the hours between 9 a.m. and 8 p.m. during the months beginning April 1 and ending September 30. When a local ordinance has stricter limitations, a supplier shall comply with the local ordinance

Notably, door-to-door sales include those made with prior appointment.

Specifically, door-to-door sales is defined as "A solicitation or sales method whereby an agent proceeds randomly or selectively from residence to residence"

When a supplier engages in door-to-door sales and marketing activity, the supplier shall notify the Bureau of Consumer Services no later than the morning of the day that the activity shall begin

A supplier shall provide the local distribution company with general, nonproprietary information about the door-to-door sales and marketing activity that caused the supplier to provide notice to the Commission as described above. The supplier shall provide this general information to the distribution company no later than the morning of the day that the sales and marketing activities begin.

The PUC said that with a host of enforcement channels, including an MOU with the attorney general, "the Commission is confident that it can effectively act upon information received through a variety of channels and enforce these regulations."

"All market participants are put on notice that the Commission will use these resources to aggressively enforce these new regulations in the public interest - to safeguard public safety and ensure fairness for all. We also take this opportunity to remind suppliers of their obligation to respect all federal, state and local laws related to sales and marketing and to note that nothing in these regulations is intended to vacate or supersede any other existing federal, state or local requirement," the PUC said.

Docket No. L-2010-2208332