On 30 March 2008, the Federal Government announced that it will proceed with amendments to the Trade Practices Act 1974 (TPA) relating to component pricing and has released the Trade Practices Amendment (Component Pricing and Other Measures) Bill 2008 (draft Bill) for public comment.
In 2006, the (then) Federal Government announced that it would amend the TPA to respond to the increased use of component pricing in a number of industries (including the automotive and airline industries). While an exposure draft was released in March 2006, no legislative changes were ultimately enacted.
The new Federal Government's Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen MP, recently announced that the Government will proceed with amendments to the TPA to prohibit component pricing. According to the Explanatory Memorandum for the draft Bill, '[t]he Government considers that consumers should be able to readily identify the price they will pay for a product or service. This [will enable] consumers to easily compare prices between like products or services and make informed purchasing decisions.'
Component pricing amendments
Broadly, the draft Bill proposes to replace the existing section 53C1 with a new section which will prohibit corporations from using component pricing when making representations to 'consumers' about the price of a good or service unless the corporation also 'prominently specifies', as a 'single figure', the 'single price' the consumer is required to pay for the good or service.
Corresponding amendments are proposed to be made to the criminal offence provisions of the TPA.
To whom does the new section apply?
As a threshold issue, the proposed new section 53C will apply only to business-to-consumer advertisements – that is, where businesses are advertising goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. The provisions will not apply to representations made between businesses or between business and government.
Can I still use component pricing?
While the new section 53C does not outlaw component pricing, businesses wishing to continue to do so will now need to ensure that they also 'prominently' specify the total price as a single figure. For example: '$79 + $35 taxes, fees and charges for a total price of $114'. To advertise the single figure prominently, it must be 'readily identifiable'. As such, specifying the single figure price in the fine print of an advertisement will not amount to specifying the price 'prominently'.
What is meant by 'single figure' and 'single price'?
The draft Bill does not define 'single figure' but the Explanatory Memorandum explains that the single figure should be an 'aggregate' of all components included in the 'single price'.
The draft Bill defines the concept of 'single price' to be the 'quantifiable consideration' for the relevant supply at the time of the representation.
'Quantifiable' is stated by the Explanatory Memorandum to mean that it can be readily converted into a dollar amount. The Explanatory Memorandum suggests, by way of example, this would cover mobile phone contracts (where the aggregate minimum amount the consumer must pay over the life of the contract can be quantified) but would not cover contracts where a price is quoted and is agreed to be calculated from the supplier's actual costs and an agreed percentage or fee (since the final price will not be known until the supply is completed).
What about taxes, duties and other charges?
Under the draft Bill, the 'single price' should include the following amounts:
- charges of any description payable by the consumer to the corporation (other than a charge payable at the consumer's option)
- the amount of any tax, duty, fee, levy or charge imposed on the corporation in relation to the supply (for example, GST - but not, for example, stamp duty on property which is imposed directly on the consumer)
- any amount payable by the corporation in relation to the supply with respect to any tax, duty, fee, levy or charge if that amount is payable under an agreement or arrangement under legislation and would have otherwise been payable by the consumer (for example, the passenger movement charge),
but does not need to include charges relating to postage and handling.
What if I advertise price using per unit/per quantity amounts?
For goods or services whose total price depends on the quantity of good or service acquired, the Explanatory Memorandum clarifies that the 'single price' should continue to be specified as a 'per quantity' amount. For example, fruit and vegetables can continue to be advertised at a 'per kilo' price.
Does this affect the advertising of financial services?
The Government has indicated that it will not proceed with corresponding amendments to the Australian Securities and Investments Commission Act 2001. As such, current legislative arrangements with respect to the advertising of financial services will continue.
Miscellaneous other amendments
Schedule 2 of the draft Bill makes amendments to the TPA to correct previous drafting errors and anomalies in the consumer product safety provisions.
Submissions from stakeholders regarding the draft Bill are due by 17 April 2008.
Copies of the draft Bill and Explanatory Memorandum are available from the Treasury website.
1. Section 53C currently prohibits businesses from making a representation as to part price without also specifying the cash price of the goods or services.
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.