The Australian Competition and Consumer Commission
(ACCC) has recently been granted new enforcement
powers, which make it easier for the regulator to penalise illegal
advertising and pricing practices.
The ACCC has exercised one of its suite of new powers by issuing
infringement notices against restaurants and cafes engaging in
"component pricing" in breach of the Trade Practices
Act 1974 (Cth) (TPA).
Component pricing is the practice of advertising only part of
the price of a good or service, without also stating the total
price payable (e.g. $50,000 plus on road costs). This
practice was prohibited by the 2009 amendments to the TPA. The
restaurants and cafes that were issued with infringement notices
had failed to state a price for their menu items that was inclusive
of weekend and holiday surcharges.
The ACCC's ability to pursue businesses that offend the
TPA's consumer protection provisions has been enhanced by their
ability to issue:
substantiation notices requiring businesses to provide
information and documents that support a claim or representation
made by the business. A failure to respond to a substantiation
notice may result in fines of up to $16,500 for corporations and
$3,300 for individuals, and
infringement notices where the ACCC has reasonable grounds to
believe that a business has contravened certain consumer protection
laws. The penalty payable under an infringement notice will vary,
but will be $6,600 for corporations and $1,320 for individuals for
most cases. If the penalty specified in the notice is not paid,
proceedings may be issued against the business.
These new powers are intended to make the ACCC's pursuit and
prosecution of businesses that do not comply with TPA easier and
more efficient. As the ACCC has and will continue to use these
powers to target isolated and industry practices, it is important
that businesses regularly conduct a "health check" of
their TPA compliance.
In particular, it will now be easier for the ACCC to seek
substantiation from businesses that regularly use comparative
advertising and "was/now" savings claims as part of their
marketing strategy. Many companies regularly make savings claims
against the recommended retail prices (RRP) for
their products. In franchising and independent dealer networks, the
law prohibiting resale price maintenance means that the franchisor
or manufacturer running the advertising campaign cannot always
verify that its products have been routinely sold at the RRP. If
the products have not been sold at the RRP, making savings claims
against this price can amount to misleading and deceptive conduct
in breach of s52 of the TPA. In this context, the ACCC may use a
substantiation notice to require a business to evidence the fact
that its network has sold a product at the RRP for a reasonable
period prior to the relevant promotion.
For further information on component pricing, please click
here. For further information on the ACCC's new enforcement
powers, please click
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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