Key Point
- Businesses will be required to specify a prominent single price for any goods or services advertised, if the business advertises any amount that would constitutes part of the price.
Businesses will need to review their advertising under a proposed new broad ranging law that requires an advertisement for consumer goods and services must state, prominently, the "total price", excluding charges relating to postage and handling, if the advertisement contains any statement about the price or part of the price payable for the goods or services.
The reform will apply to all consumer goods and services, except financial services.
Businesses which will be particularly affected include:
- those who sell by volume or time
- those who charge contingency fees; or
- service providers whose prices are not ascertainable as a total up front, such as airlines, or sellers who sell to different places with different delivery charges or state taxes.
How will the law change?
If this bill is passed, the Trade Practices Act will include, for the first time, a requirement for businesses to specify a prominent single price for any goods or services advertised, if the business advertises any amount that would constitute part of the price.
For example if the bill becomes law:
- It will not be lawful to advertise an airline ticket as "$299 plus fees and charges". The total amount including those fees and charges will have to be stated.
- It will not be lawful to advertise goods or services as "$39 plus GST" - the total GST inclusive price must be stated.
- It will not be lawful to advertise a new motor vehicle for sale by lease finance with the claim "from $299 per month" without there being somewhere a prominent statement of the total price.
According to the Explanatory Memorandum, stating the total price in the fine print in an advertisement will not be enough to comply with the new laws.
The new legislation will require the business to specify the single figure price "in a prominent way".
The obligation to state a single price applies to the extent that the price is quantifiable by the supplier.
Optional extra charges
The obligation on suppliers to state a total price does not extend to additional amounts payable which depend on "optional extras" selected by the customer, such as additional product features, or alternative payment means which might attract an additional charge eg. by credit card.
For mobile phone services where a minimum 12 month commitment is required to be eligible for a stated handset price, suppliers must state the minimum amount payable by the consumer over that period of time, even if the actual amount payable by consumers may well fluctuate in regard to usage.
Where, for some goods or services, part of the price is quantifiable and part is not quantifiable, you must state the quantifiable amounts if any statements at all about price are advertised.
Delivery and handling charges
Postage and handling charges will not need to be stated provided that they are directly related to postage as well as the process of packing, moving, carrying or transporting goods.
The Government expects that where delivery is mandatory and a charge applies, those charges must be stated if they are quantifiable at the time of the advertisement.
Any applicable stamp duty does not need to be included in a single price advertised because it is treated as a charge imposed directly on the consumer.
What should you do?
Although this is still a draft version of the Bill, we think it is close to the final version - as the Bill has been under consideration for two years or more, it may be difficult to seek changes unless a new scenario is put to Treasury which highlights particular compliance problems.
It is likely the Bill will become law later in 2008. Because penalties will apply businesses should review advertising campaigns and sign off procedures to ensure good compliance.
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.