ACCC's guide on carbon price claims
The ACCC has released its "Carbon price claims: guide for business" to help businesses understand their rights and obligations when making claims about the impact of carbon tax (Guidelines).
The ACCC is keen to ensure that businesses do not use the carbon tax as a means to justify large increases in prices for consumers. Whilst the ACCC acknowledges that businesses are free to set their own prices, it will be policing the claims made in relation to such pricing.
In summary, the Guidelines provide that claims made by businesses about the impact of carbon tax should be accurate, not mislead consumers, be based on reasonable grounds, and can be substantiated. In particular, businesses should not:
- overstate the impact of carbon tax by representing that an entire price increase is due to carbon tax, when only a proportion of the total price increase is attributable to the carbon tax
- in the lead up to the commencement of the carbon tax scheme:
- wrongly suggest that a carbon tax will affect businesses' goods or services before 1 July 2012
- make representations about the future impact of the carbon tax on their prices by, for example, exaggerating cost savings to consumers to encourage purchases before 1 July 2012.
- make general claims that prices have increased because of the carbon tax, when the business has no factual basis to substantiate such claims.
The ACCC will consider it acceptable practice for a business which is unsure of the impact of the carbon price, to:
- seek the assistance of an expert adviser to make reasonable projections about the likely price impact, and then represent to its customers that certain price increases are due to the "projected" impact of a carbon tax
- consider and compare information from a range of reasonable sources (eg electricity and gas bills, supplier invoices, supplier statements about their prices and carbon tax, business calculators, information from industry associations and the government) in determining the impact of the carbon tax on its costs, and ultimately the business' prices.
However, the Guidelines make it very clear that businesses should exercise caution when assessing whether it is reasonable to rely on the various sources of information (eg the type of carbon price calculator used and the range of information the calculator considers), and ensure that it has properly and accurately assessed and checked for itself the impact, based on its own costs and circumstances.
Caution against price-fixing
While businesses attempt to grapple with the application and impact of the carbon tax, they should also ensure that they:
- exercise caution when engaging in discussions with competitors (especially at industry associations) about the effects of the carbon tax
- do not enter into any contract, arrangement or understanding with their competitors relating to the price of their goods or services, or subsequent pricing adjustments that are attributable to the carbon tax
- independently set their prices for goods or services.
ACCC investigative and enforcement powers
The ACCC has openly announced that this is a priority area, especially in light of the Australian Government's specific directive to undertake a compliance and enforcement role in relation to carbon tax pricing claims. Accordingly, businesses can expect that any carbon tax related pricing claims made will be scrutinised by the ACCC and any complaints received from consumers or small businesses will be reviewed as a priority. The ACCC may seek to achieve general deterrence by actively prosecuting a high profile business offender.
As we mentioned in our August 2011 eAlert!, the Australian Government is providing new funding to the ACCC for "6 carbon cops" to investigate, monitor and control how businesses work the carbon tax into their pricing structures and representations to consumers. The ACCC will have powers to investigate and prosecute businesses for making misleading carbon tax related pricing claims and impose penalties of up to A$1.1 million.
The ACCC may ask businesses to provide information that supports claims made about the impact of carbon tax by:
- making a written request for information
- issuing a substantiation notice requiring a business to provide documents and information within 21 days of the notice that supports the claims made in relation to a carbon tax related price increase.
Businesses which propose to increase their prices to pass on carbon tax related costs should:
- exercise diligence and care when relying on various information sources and carbon price calculators to assist in determining the impact of the carbon tax on its own costs, and ultimately its prices
- seek specialist energy law advice if in doubt as to how the Act will impact upon their businesses
- accurately capture, quantify and record all carbon tax related costs in order to substantiate any carbon tax related price increases
- properly and reasonably assess the impact of the carbon tax and how to accurately make representations to consumers about the impact of the carbon tax
- exercise caution if discussing the impact of the carbon tax on prices with competitors
- review all pricing representations to ensure no false, misleading or exaggerated claims are made about the impact of carbon tax related costs on their pricing.
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.