Trade Practices Alert - Component Pricing
LegalTalk - June 2009
On 25 May 2009, the Trade Practices Amendment (Clarity in Pricing) Act came into effect. This Act amended section 53C of the Trade Practices Act (the Act) to require suppliers of consumer goods and services which adopt component pricing in representations made to consumers, to now specify prominently, as a single figure, the total price the consumer will be required to pay. A single total price enables consumers to compare similar products and services and make informed purchasing decisions.What is component pricing?
Component pricing is where a business advertises the cost of goods or services in component parts rather than a single cumulative figure. For example, '$10 plus $5 fees and taxes'. While component pricing may continue to be used, a single cumulative figure reflecting the total cost must be 'prominently' displayed. For example, '$10 plus $5 fees and taxes = $15'.What is the single price?
The single price is defined as the 'minimum quantifiable consideration for the supply' of goods or services at the time of making the representation.What does 'quantifiable' mean?
An amount is quantifiable if it can be readily converted into a dollar amount at the time of making the representation. The guidelines issued by the Australian Competition & Consumer Commission (ACCC) state that the single price must include:- charges payable by a consumer to purchase the good or service (e.g. booking fees); and
- taxes, duties, fees, levies or charges payable by a consumer for the supply of goods or services.
- optional extras;
- sending charges (the ACCC states that mandatory sending charges must be included in an advertisement but not in a single price);
- third party payments not passed on to the consumer; and
- any non-quantifiable components.
What does 'prominent' mean?
A prominent single price is one that stands out so that it can easily be seen by a consumer. The single price should be displayed as prominently as any other pricing in the advertisement. The ACCC guidelines suggest that the factors that should be considered when assessing prominence include the advertising medium used and the size, colour and font used.Exceptions to Section 53C
Section 53C does not apply in the following circumstances:- Where a representation is being made exclusively to a business rather than an individual; or
- Where services are supplied under a contract (for a term) that provides for periodic payments. Whilst a single price must be displayed, it does not need to be as prominent as other components.
What are the Penalties for non-compliance?
The penalties for breaching section 53C include fines of up to $1.1 million for corporations and $220,000 for individuals.Motor Vehicle Industry
The implementation of section 53C of the Act is having a significant impact on the advertising practices of the motor vehicle industry. Motor vehicle companies are no longer able to advertise a vehicle for sale exclusive of 'on-road costs and dealer delivery charges'. The ACCC guidelines suggest that an advertisement for the price of a motor vehicle should now include the following:- vehicle purchase price;
- stamp duty;
- compulsory third party insurance (CTP);
- registration (if less than 12 months to be included, then must be clearly stated in the advertisement); and
- dealer delivery fee.
Travel Industry
In order to comply with section 53C airlines will now have to advertise the cost of flights and unavoidable taxes and charges. Additionally, where a customer can only pay for flights with a credit card and a fee is charged, this fee must be included in the single price.Travel agents must also be mindful of the requirements of section 53C when advertising holiday packages. It is important that the total price be displayed as prominently as all other charges which must be paid and that asterisks only be used to explain a price representation in further depth, not to correct a misleading impression created by the advertisement.
Hospitality Industry
Restaurants are no longer able to simply charge customers a 10% surcharge on the total bill on weekends and public holidays. Instead, restaurants are required to present customers with a new menu in which each of the prices on the menu is inclusive of the 10% charge. In many cases, determining whether businesses comply with the new legislation in their advertisements will be complex.
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