Australia: Carbon tax repeal – the ACCC will be watching your prices!

Clayton Utz Insights
Last Updated: 25 December 2013
Article by Paul Burton and Dan Howard

Key Points:

Businesses will need to carefully review their contractual arrangements to determine how they respond to the repeal of the carbon tax.

While the main aim of the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (Cth) is to repeal the carbon tax brought in by the Clean Energy Act 2011 (Cth) and related Acts, the Bill also seeks to ensure that businesses and consumers benefit from price reductions, particularly in relation to their energy bills, by the removal of the carbon tax impost.

The Government has sought to achieve this aim by amending the Competition and Consumer Act 2010 (Cth) (CCA) to revive Part V of the CCA to include new provisions which will prohibit corporations:

  • engaging in price exploitation in relation to the repeal of the carbon tax; and
  • making false or misleading representations concerning the effect of the carbon tax scheme or its repeal on the price for the supply of goods or services.

Prohibition on price exploitation

The Bill creates a new section 60C(1) which provides that a corporation must not engage in price exploitation in relation to the carbon tax repeal. Section 60C(2) provides that a corporation will engage in price exploitation in relation to the carbon tax repeal if:

  • it makes a regulated supply;
  • the price for the supply is unreasonably high, having regard alone to the carbon tax repeal; and
  • the price for the supply is unreasonably high even if other matters are also taken into account (including the supplier's costs, supply and demand conditions or any other relevant matter).

A regulated supply involves a supply of natural gas, electricity, synthetic greenhouse gas or SGG equipment occurring between 1 July 2014 and 30 June 2015.

This means that suppliers of natural gas, electricity, synthetic greenhouse gas and SGG equipment will need to be able to justify the prices that they charge their customers following the repeal of the carbon tax.

Importantly the application of section 60C is not limited to the retail supply of gas and electricity. Therefore, each entity making a supply in the supply chain will need to ensure that it does not engage in price exploitation.

False or misleading representations about the effect of the carbon tax repeal on prices

The Bill also creates a new prohibition in section 60K. Under it, a corporation must not, in trade or commerce, in connection with the supply or promotion of any goods or services, make a false or misleading representation concerning the effect of the carbon tax scheme or its repeal (or any part of it) on the price for the supply of goods or services between 1 July 2014 and 30 June 2015.

Similarly, section 60K is not limited to the retail supply of goods or services. Further, the provision is not limited to the supply of gas or electricity. Rather, it applies to the supply of any goods or services.

Penalties and remedies

If a Court finds that sections 60C(1) or 60K of the CCA have been contravened, it may impose a pecuniary penalty of up to $1.1 million on corporations and up to $220,000 on individuals in respect to each contravention.

The existing remedies which are contained in Part VI of the CCA will also be available in respect of contraventions of these new provisions. Therefore, for example, any person who suffers loss or damage by another person's price exploitation conduct or because of a false or misleading representation, they may recover damages under section 82 of the CCA.

The ACCC's powers

The Bill also gives the Australian Competition and Consumer Commission (ACCC) wide-ranging powers to give a corporation written notice where the ACCC considers that the corporation has engaged in price exploitation in relation to the repeal of the carbon tax (section 60D). The ACCC may also give a written notice if it considers that the notice will aid in preventing such exploitation (section 60E).

Additionally, the ACCC may monitor prices to assess the general effect of the carbon tax repeal, including the effect on prices advertised, displayed and offered. These price monitoring activities can occur from the date of the commencement of the enabling section (section 60G).

The ACCC also has broad information-gathering powers. A member of the ACCC may require person/s to give information or produce documents relating to prices or the setting of prices where the member believes that the information or documents will be useful to the ACCC's price monitoring activities. The information or documents may relate to prices or the setting of prices before or after the carbon tax repeal or during any situation or period specified in the notice.

Despite being an offence provision, an individual is excused from giving information or producing a document on the ground that the information or document might tend to incriminate the individual or expose the individual to a penalty.

Infringement notices

The ACCC may also issue an infringement notice if the ACCC has reasonable grounds to believe that a person has contravened the price exploitation provision (section 60C) or the misleading and deceptive provision (section 60K). Penalties payable for non-compliance with infringement notices range from $102,000 for a listed corporations to $2,040 for individuals.

If a person fails to make payment pursuant to a valid infringement notice, the person is liable to proceedings under Part VI of the Act.

The compliance period for the infringement notice is relatively short – 28 days from when the infringement notice was issued by the ACCC. Only one extension may be given (up to a maximum of a further 28 days).

Persons who have received infringement notices can make written representations to the ACCC seeking withdrawal of the notice. Any evidence or information given in the course of making such representations is not admissible in evidence against the person in any proceedings.

Guidance from the ACCC

The ACCC has advised that it will not be specifying or dictating what prices should be, but will rather enforce the new provisions to ensure that consumers benefit from the expected price reductions. However, the ACCC has stated that it will consult with industry associations, small business groups and consumer representative groups to provide practical guidance to businesses and consumer about their responsibilities and rights in respect of the new provisions.

Implications for electricity and gas businesses

On its face, the price exploitation provisions seem simple enough. If, as a business you have passed on to your customers an increase in the price of your goods or services because of the impost of the carbon tax, then upon the repeal of the carbon tax, the prices you charge your customers may be expected to decrease by the amount of the impost previously passed on.

However, upon the repeal of the carbon tax (whether that be on 1 July 2014 or at a later date) this may not result in automatic price reductions from that date. Just as prices for some goods did not increase immediately on the commencement of the carbon tax, it is clear that the effect of the repeal of the carbon tax will take time to filter through and that electricity and gas businesses may still incur carbon-related costs even after 1 July 2014. For example, the greenhouse gas reporting obligations will remain and these costs will still be incurred by relevant businesses.

Clearly, relevant businesses will need to carefully review their contractual arrangements to determine how they respond to the repeal of the carbon tax. In the event that a regulated supply includes a component of carbon related cost, that business will need to be able to explain to the ACCC the reason for including these costs in the price, if the ACCC requests an explanation.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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