Australia: Misleading Carbon Price Claims – the ACCC is Swift and Effective

Last Updated: 4 August 2012
Article by Laura Hartley

On 26 July 2012, the Australian Competition and Consumer Commission (ACCC) released its second report in relation to carbon price complaints. While the number of complaints and enquiries is declining, there are still many complaints being made in relation to the energy, landfill, refrigerant gas and building and construction sectors. The ACCC has also been quick and effective in taking action against those making false carbon price claims, and has already obtained three undertakings from companies for false carbon price claims. Businesses must remain mindful of their obligations in this post 1 July phase.

The principles

The principles are simple: a business must ensure that claims about the effect of the carbon price mechanism on the prices for goods and services being supplied by that business are truthful and have a reasonable basis. A business can fall foul of the Competition and Consumer Act 2010 (Cth) if it:

  1. represents that a rise in prices is due to the carbon price, when no part is attributable to the carbon price;
  2. overstates the impact that the carbon price has on its price increases (for example, by representing that the whole of a price increase is due to the carbon price when only a part of it is); or
  3. fails to offset its price increases by any compensation payments received from the Federal Government to offset the effect of the carbon price.

The ACCC's compliance and enforcement role

The Federal Government has allocated $12.8 million in funding over four years to the ACCC to undertake a compliance and enforcement role dedicated to investigating carbon price claims and the ACCC has used this to establish a dedicated team whose activities are directed at enforcement and education of businesses and consumers. The ACCC also just launched an ACCC Carbon Price Claims Hotline and an online carbon price claim form, making it easier for consumers and businesses to complain if they suspect a carbon price claim is false or misleading.

Data about carbon pricing complaints

The ACCC has received just over 1260 carbon price complaints and enquiries between 1 July 2012 and 24 July 2012. The ACCC received 630 carbon price complaints and enquiries within the first 10 days of the introduction of the carbon price mechanism and states the new numbers represent a decline from an average of 63 complaints per day to approximately 45 per day, with the trend continuing downwards. Whilst the numbers may not be large considering the ACCC received over 900 complaints and enquires per day across all other matters in the same period, the numbers are still substantial and indicate that consumers and other businesses are not wary of picking up the phone to the ACCC.

The ACCC has acknowledged that most complaints or enquiries have been about general price increases and not specifically about false or misleading carbon price claims. Many have arisen from confusion between claims about the carbon price and other price adjustments. The ACCC recognises that a business might try and ensure its representations are clear and accurate, but "a stray comment from an employee that casually refers to price increases as being carbon related when they are not could result in a complaint to the ACCC."

Businesses should look at whether they are attributing any price increases to the carbon price, and if so, ensure the claims are truthful and have a reasonable basis. Importantly, businesses should ensure its employees are educated and trained about these requirements.

Sectors attracting the most complaints

The ACCC has stated that the sectors that record the most complaints are:

  1. Energy: The highest numbers of complaints have been from consumers and businesses regarding energy retailers. Many queries are being raised about price increases in electricity and gas bills. Power stations that are large emitters as well a natural gas suppliers (or organisations using large quantities of natural gas) are liable under the carbon price mechanism and so price increases in this sector are common.
  2. Landfill: Complaints are being received about price increases in the landfill sector. Landfill facilities that are large emitters are liable under the carbon price mechanism. Calculating the pass through costs resulting from the carbon price mechanism for landfill is a complex task to be undertaken by local councils and landfill operators. The ACCC has contacted local councils and industry associations to work out their approach.
  3. Refrigerant gases: Complaints are being received about price increases in the refrigerant gas sector. Businesses in these sectors should be careful not to attribute an entire price increase to the carbon price mechanism if this is not the case. The price of synthetic greenhouse gases (used mainly as refrigerant gases) listed under the Kyoto Protocol, and equipment or products containing these gases, increased from 1 July 2012, with the application of an equivalent carbon price. The ACCC states that price increases in this sector might also be a result of reductions in supply, increased costs of raw material, a greater demand for refrigerant gases and some refrigerants being targeted for usage reductions.
  4. Building and construction: Complaints about price increases in the building and construction industry have also been high. The carbon price mechanism affects the building and construction industry through its use of certain materials with high carbon intensity (although industry assistance may also be available in some areas). It is difficult to determine how the carbon price mechanism has increased costs in this industry as the price of materials used in construction varies each year. The ACCC states it continues to have discussions with building businesses and industry associations about their carbon price claims.

ACCC powers

The ACCC may request that a business support any claims it makes about the impact of carbon pricing, either by a written request or more formally through a substantiation notice. The ACCC's powers include:

  1. seeking court imposed pecuniary penalties of up to $1.1 million for a corporation and $220,000 for an individual;
  2. issuing infringement notices of up to $66,000 for a listed company, $6,600 for an unlisted company and $1,320 for an individual, for each individual claim it considers to be false or misleading;
  3. seeking a court enforceable undertaking or an informal undertaking; and
  4. taking other legal action, such as seeking an injunction.

A business must ensure it can substantiate any carbon price claim it makes. All documents, calculations, invoices and communications with suppliers and other parties relied upon to make a carbon price claim should be kept.

Action the ACCC has taken

The ACCC has already issued educative or warning letters to approximately 30 businesses. It has also accepted the following undertakings:

  1. Brumby's: A court enforceable undertaking was accepted from Retail Food Group Limited, owner of Brumby's Bakeries Pty Ltd, following comments by Brumby's managing director in an internal newsletter to its franchisees to "let the Carbon tax take the blame" as the reason for retail price increases. Neither company had conducted any analysis on the effect of carbon pricing on Brumby's retail product prices. The ACCC considered this statement might encourage Brumby's franchisees to make representations to its customers linking price increases to the carbon price mechanism without reasonable basis.
  2. Equipserve: A court enforceable undertaking was accepted from Equipserve Solutions Pty Ltd, a refrigeration and electrical installation and maintenance business, in respect of a representation in an email to its customers attributing the entire amount of an increase in the price of synthetic greenhouse gas refrigerant R404A to the carbon price when this was not the case. Equipserve admitted it had not conducted an analysis of the impact of the introduction of the carbon price mechanism on its refrigerant products, and could not substantiate the increase was wholly attributable to its introduction.
  3. Polaris Solar and ACT Renewable Energy: Informal undertakings were accepted from Polaris Solar Pty Ltd and ACT Renewable Energy Pty Ltd, suppliers of solar panels, for misleading carbon price claims regarding household electricity prices. The companies produced and distributed leaflets, before the introduction of the carbon price mechanism, promoting their solar panels by making claims about the increase in electricity prices that would occur due to the introduction of the carbon price mechanism. The advertisements indicated the figures were based on independent studies, but were actually based on unsubstantiated claims from a newspaper advertisement.

The ACCC has been effective in policing misleading carbon price claims. It continues to be well funded to police further claims. Businesses need to exercise diligence in determining the effect of the carbon price mechanism on their prices, review all documents they are issuing which mention price rises for representations about the effect of the carbon price and ensure these claims can be substantiated and train their employees on the dos and don'ts of all communications in relation to price rises.

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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Laura Hartley
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