OTTAWA -- The federal Competition Bureau announced Thursday that it has reached agreements with two companies aimed at strengthening competition and consumer choice in Ontario's residential water heater industry.

Under the agreement, one of the companies, Reliance Comfort Limited Partnership, will pay a $5-million administrative penalty and contribute $500,000 to the bureau's investigation into what it called "anti-competitive water heater return policies and procedures aimed at preventing consumers from switching to competitors."

"As a result of these anti-competitive practices, many customers had little choice but to continue their rental agreements even if they wanted to purchase a new water heater or switch to another rental provider," the bureau said.

In addition to the monetary penalties, Reliance is also required to take "certain steps to make it easier for customers to terminate their rental agreements and return their water heaters," it said.

The settlement arose out of applications the bureau filed with the Competition Tribunal in 2012 challenging alleged anti-competitive practices against Reliance and privately held Direct Energy in 2012.

Meanwhile, the bureau said it subsequently approached EnerCare Inc. after learning it planned to acquire Direct Energy's water heater business in Ontario.

"EnerCare was not the subject of the bureau's application regarding Direct Energy's practices and has not engaged in any anti-competitive behaviour," it said.

"However, given its acquisition of Direct Energy's water heater rental business, the bureau has obtained written commitments from EnerCare that put an end to Direct Energy's anti-competitive behaviours."

Meanwhile, the bureau said it was continuing litigation before the tribunal against Direct Energy and is seeking, among other things, an administrative penalty of $15 million.

A hearing is scheduled to begin March 2.