Australia: False and misleading carbon price claim

Last Updated: 22 July 2011
Article by Shaun Temby

By now, every Australian would be aware that the current Australian Federal Government is proposing to introduce a carbon pricing mechanism (Mechanism) from 1 July 2012.  As we reported in our article "Carbon pricing mechanism snap shot: key features, certainty and flexibility" (10 July 2011).

This policy is perhaps the largest economic and environmental reform in a generation. It has far reaching implications for business, including those covered by the Mechanism and those indirectly affected, as well as those businesses operating in Australia and those investing in Australia.

One of the central concerns of Government has been to ensure that businesses do not attempt to exploit any uncertainty in the minds of consumers (created by this new regime) by "jacking up prices unnecessarily" or making false or misleading claims in relation to the carbon price.1

ACCC role in policing pricing

To address its concerns regarding the exploitation of consumers during the lead up to and introduction of the Mechanism, the Government has announced that the ACCC will receive funding of AUD$12.8 million over four years and will employ additional staff to facilitate the investigation and prosecution of businesses that falsely attribute price increases to the new carbon tax and also to assist with the education of businesses on this issue.2

The ACCC's role in investigating and prosecuting instances of price exploitation in relation to the carbon tax will be similar to the role it played from 1999 to 2002 in relation to the prosecution of businesses that unreasonably increased their prices in response to the commencement of the Goods and Services Tax (GST). During this period, the ACCC investigated approximately 7000 matters, instituted court proceedings in 11 matters and accepted 55 court-enforceable undertakings.3

Lessons from the GST

While the GST "price exploitation" provisions of the Trade Practices Act (as it was known at the relevant time) are no longer current law, the ACCC has more than adequate powers under the existing provisions of the Australian Consumer Law or "ACL" (which relevantly replaced the Trade Practices Act) to enable it to fulfil its carbon price policing role.  In particular, the ACL contains a broad prohibition against making false or misleading representations in connection with supply or possible supply of goods and services or in connection with the promotion by any means of the supply or use of goods and services.

Importantly, such false or misleading representations will be judged in the mind of the ordinary, reasonable consumer having regard to the context in which the pricing claim is made.  Such representations can be express, through the use of printed words or oral statements, but may also be implied from a combination of words, statements, pictures, impression and silence.

Given the high degree of advertising that will no doubt accompany the lead up to the introduction of the Mechanism (from Government, the Federal Opposition and from industry) and the accompanying media attention, it is not too great a stretch to suggest that the ordinary reasonable consumer will have the Mechanism and its effect in mind when considering pricing claims and other marketing material relating to the purchase of new goods and services.  Heightened consumer awareness will mean that consumers will be on guard, raising the risk of complaints being made to the ACCC, as played out with GST.  Businesses will therefore need to be extra careful in the lead up to and during the introduction of the Mechanism.

The scope of conduct caught by this prohibition is well illustrated by two matters for which the ACCC took action in relation to the GST.  In one of the matters, the ACCC took action in relation to claims by Sarai Holdings Pty Ltd, trading as Zoeros Lifeskills Training, that a course would be offered for AUD$395 until 2000 when the same course would cost AUD$495 "to come into line with the GST Government changes".  The ACCC was concerned that this representation implied that the price of the course would rise by approximately 25 per cent once the GST was introduced when in fact the introduction of GST might in the short term result in a price increase of no more than 10 per cent. The ACCC accepted undertakings from Sarai Holdings Pty Ltd that it would not publish similar representations and would not make representations concerning the GST when it did not have reasonable grounds for making the representation.4

In a similar claim, the ACCC commenced proceedings against A Whistle and Co (1979) Pty Ltd, trading as Electrodry Carpet Dry Cleaning, alleging misrepresentations and false and misleading conduct in relation to a brochure distributed by Electrodry that promoted the GST-exclusive component of the price in very large prominent print with the total price including GST in much smaller print.  The ACCC successfully obtained, by consent orders, a Federal Court declaration that Electrodry breached sections 52 and 53(e) of the (then) Trade Practices Act, injunctions preventing future similar conduct and a direction that Electrodry implement a trade practice compliance program.5

New ACCC powers

Additionally, since the GST was introduced, the ACCC has gained significant new powers that will aid it in its carbon policing role.  In particular, the ACCC may now issue substantiation notices, which require recipients of the notices to provide the ACCC with information and/or documents capable of substantiating the claims or representations made.  The failure to comply with a substantiation notice, or the provision of false or misleading information to the ACCC in purported compliance with a substantiation notice, may subject businesses to penalties of up to AUD$27,500.

The ACCC may also issue infringement notices which provide an opportunity for a business to pay a penalty and resolve a matter with the ACCC. If a business which has been issued with an infringement notice does not pay the infringement notice penalty, the ACCC may commence proceedings in respect of the underlying alleged contravention of the ACL.

What it means for business?

On the basis of the ACCC's previous approach to the prevention of price exploitation when the GST was introduced, coupled with its new investigative and enforcement powers, businesses will be well advised to carefully consider any pricing claims that directly or indirectly reference the Mechanism, or the "carbon tax" as it is more commonly known.  This is particularly so given the complexity of the Mechanism and the calculation of how it is going to effect consumers, especially once the various compensatory measures that accompany the tax are taken into consideration.

Norton Rose Australia will issue a more detailed update covering this issue, and the wider ramifications for different industries, in the coming weeks.



1  Transcript, ACCC funding to deal with false claims relating to the carbon price; Latrobe Valley; Polls, Press Conference, Melbourne  13 July 2011
2  Ibid
3  Australian Competition and Consumer Commission, GST Final Report – ACCC oversight of pricing responses to the introduction of the new tax system January 2003 at p. 1

4  Ibid, at p. 33
5  Ibid, at p.21

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Shaun Temby
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