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Focus: Competition Law – April 2008

Revised Component Pricing Bill released

In brief: The Federal Government has released for public consultation a revised Trade Practices Amendment (Component Pricing and Other Measures) Bill 2008, which would require corporations to specify, in a prominent way, a single price for goods and services. Partners Carolyn Oddie (view CV) and Jacqueline Downes (view CV), and Law Graduate James Greenwood report.

How does it affect you?

  • Companies that advertise goods to consumers should review the draft legislation to see how it will impact on their existing advertising practices and whether the legislation is workable in the context of how those companies advertise prices.
  • Submissions on the revised draft Bill can be made to Treasury by 17 April 2008.

Introduction

The Federal Government has released for public consultation a revised draft amendment to the Trade Practices Act 1974 (Cth) (the TPA) that would require corporations to specify, in a prominent way, a single price for goods or services.

The amendment seeks to address the practice of 'component pricing', which involves suppliers advertising or quoting the price of a good or service in its component parts rather than as a single, all-inclusive figure. The Government's concern is that this practice may inhibit the ability of consumers to easily compare prices between like products or services and, hence, make informed purchasing decisions. Foreshadowing the Trade Practices Amendment (Component Pricing and Other Measures) Bill 2008, Assistant Treasurer Chris Bowen stated in a speech to the National Consumer Congress on 6 March 2008 that 'it is a fundamental concept of a well functioning market that consumers should know how much they are going to pay when making a purchasing decision'.

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Background: section 53C of the TPA

The Bill seeks to amend s53C of the TPA, which prohibits a corporation from making a representation with respect to an amount that would constitute part of the consideration for the supply of goods or services unless the corporation also specifies their cash price. In a series of decisions, the Federal Court has found that this section does not prohibit the practice of 'component pricing'. For example, in ACCC v Signature Security Group1, the court found that a statement to the effect that a price is $295 plus GST of $29.50 would be in conformity with s53C. Further, a failure to include a compulsory delivery charge as part of a computer's advertised price was held in ACCC v Dell Computers2 not to contravene s53C (although it was found to be a misleading representation with respect to the price of the good).

The revised draft Bill does not actually prohibit 'component pricing,' but rather requires such pricing to be accompanied by a single price, displayed in a prominent way.

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The 2006 draft Component Pricing Bill

The Federal Government first issued a draft Component Pricing Bill for public consultation in March 2006. That Bill proposed replacing the requirement in s53C that corporations specify a 'cash price' for goods and services, with a requirement that they 'specify, in a prominent way and as a single figure, the total minimum price' for the goods or services. The proposal drew criticism on several grounds and was not put before Federal Parliament. There were concerns that a blanket rule would not be workable, and that highlighting a minimum price payable could mislead consumers into believing that the minimum price was the actual price payable.

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The 2008 Bill

The revised draft Bill attempts to address concerns identified by business and legal practitioners in relation to the previous Bill by replacing the term 'total minimum price' with the term 'single price', which is defined as 'the quantifiable consideration for the supply concerned at the time of the representation concerned'. This definition is subject to several qualifications, such that the single price required to be displayed:

  • only includes amounts that are quantifiable at the time of the representation;
  • does not include charges that are payable at the option of the consumer;
  • does not include postage or handling; and
  • does not include taxes, duties, fees or levies unless they are imposed on, or payable by, the corporation making the supply. For example, stamp duty is ordinarily exempt, whereas airline passenger taxes are not.

Furthermore, the amendment is intended to only apply to the supply of goods or services by corporations to consumers - meaning that supplies made by a corporation to another corporation or government would be exempt. It seeks to do this by defining goods and services, for the purposes of s53C, as goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. However, some business-to-business supplies may still be caught; for example, where there is a resupply of such goods or services by another business.

Other concerns remain about the practical implementation of this Bill. The Bill introduces several new concepts, the meaning of which are undefined. For example, it is unclear what would constitute specifying the single price in a 'prominent' way, although the draft explanatory memorandum accompanying the Bill indicates that specifying the single price in the small print of a newspaper advertisement would not be sufficient. In addition, it is unclear how the amendments apply where there are different options for consumers in purchasing goods or services and different charges depending on how the goods or services are bought.

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Conclusion

The purpose of the proposed changes is to enable consumers to compare 'like with like' when making purchasing decisions. Although the changes may provide more information for consumers, they introduce a level of uncertainty for business, particularly in regards to what constitutes a 'single' price in differing circumstances and what level of disclosure will be required.

Submissions on the draft Bill can be made to Treasury and are due by 17 April 2008.

Footnotes
  1. ACCC v Signature Security Group [2003] FCA 3.
  2. ACCC v Dell Computers Pty Ltd [2002] FCA 847.

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