ACCC clarifies new component pricing requirements

The Australian Competition and Consumer Commission ("ACCC") has released an information guide, News for business – Component price advertising, to explain the application of the Trade Practices Amendment (Clarity in Pricing) Act 2008 (Cth) ("Clarity in Pricing Act") to businesses.

In addition to the general guide, the ACCC has launched a "Component pricing" page on its website (http://www.accc.gov.au) and has issued industry-specific guides for the motor vehicle industry, the travel industry and a guide for electrical goods, whitegoods and furniture advertising.

In the current edition of the Hunt & Hunt Commercial Update, we explain in detail how the Clarity in Pricing Act will apply. In short, from 25 May 2009, corporations will be required to specify, in a prominent way and as a single figure, the single price for goods or services that they are supplying or promoting to consumers.

The Clarity in Pricing Act

The Clarity in Pricing Act repeals the existing section 53C of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") and substitutes a new section 53C into the Trade Practices Act. The purpose of the amendments is to prevent businesses from misleading consumers through the use of component pricing, which is the practice of pricing goods and services as the sum of multiple parts. For example, motor vehicle dealers will no longer be permitted to advertise a car as $19,990 plus on-road costs.

If you are supplying or promoting goods or services to consumers, you must specify a single price which must include:

  1. charges of any description payable by the consumer (excluding optional charges); and
  2. any tax, duty, fee, levy or charge in relation to the supply; but is not required to include:
  3. optional charges, for example, a credit card surcharge will not need to be included in the single price where there are alternative payment options but must be included in the single price where there is no other method for payment; and
  4. charges that are payable in relation to sending the goods to the consumer (e.g. postage, courier fees), however, where such charges must be paid by a consumer and the amount of these charges is known, you must disclose the minimum of those charges as a separate component of price (e.g. $55 plus $20 freight).

ACCC guidance

The ACCC has confirmed that the prohibition does not apply to representations made exclusively to businesses. However, as we noted in our Commercial Update, you might find that your company inadvertently promotes its goods or services to consumers. You may not have any control over who looks at a price list on your website.

The Trade Practices Act will require the single price to be "at least as prominent" as the most prominently displayed component of the price. The ACCC has said that a "prominent" price is one that stands out to a consumer, is clear, eye-catching and noticeable. The ACCC has echoed our recommendation that, among other things, the size, colour and type of font are important considerations in this context.

The ACCC has noted that the single price means the minimum total cost able to be quantified at the time of making the price representation and an amount is quantifiable if it can be readily converted into a dollar amount. Furthermore, if a charge is subject to variation then you must calculate it based on best available information and clearly advise the consumer that it may be subject to change.

This means that where a total price is not quantifiable but a minimum total price is known you must disclose the minimum price as a single figure and advise the consumer that not all components are included in the minimum price.

What you need to do?

  1. Read our Commercial Update and visit the ACCC website for further information on the changes to the Trade Practices Act.
  2. Consider whether you are supplying or promoting your goods and services to consumers.
  3. When you make a price representation to consumers, remember to include all taxes, duties, fees, levies or charges that can be calculated at that time and if you are unable to quantify a component of the price, clearly advise consumers that the component is not included in the single price.
  4. Ensure that the single price is displayed at least as prominently as any component prices.
  5. Review your price lists, advertisements, quotes, invoices and any other documents which display your prices and seek our advice if you are unsure whether your materials are compliant with the Trade Practices Act.

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.