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Tuesday, 14 October 2008
Page: 9096

Mr HARTSUYKER (7:11 PM) —It is with great pleasure that I rise for the second time to speak on the Trade Practices Amendment (Clarity in Pricing) Bill 2008, because in this current climate of uncertainty and financial turmoil it is more important than ever that we ensure that consumers are able to get value for money in their purchases. As the global turmoil begins to hit home there will be less money to go around, and getting value for money will become even more important. The coalition has consistently stated that we are in favour of providing more and better information to consumers. Better information allows consumers to make informed choices. This increases competition and helps to prevent sellers taking advantage of consumers.

This component pricing legislation is designed to provide consumers with a more meaningful suite of information. It is also intended to prevent advertising that may be misleading. A 1986 amendment to section 53 of the Trade Practices Act prohibited corporations from advertising only part of the price of a product without also disclosing the cash price necessary to purchase that product outright. The term ‘cash price’ is not defined in that amendment. This measure was introduced to prevent car dealers from advertising only the deposit price for a car without also publishing the total cost of the vehicle. It was thought that this amendment would also prevent a business from claiming that an advertised price was the total price for a product when in fact it was only part of the price.

In 2002 and 2003, Federal Court rulings in the cases of the Australian Competition and Consumer Commission v Dell Computers Pty Limited and Australian Competition and Consumer Commission v Signature Security Group Pty Limited challenged this thinking. The court rulings made it clear that in certain circumstances a company was not in breach of section 53C of the Trade Practices Act if it published component prices. In response to these Federal Court rulings, the Howard government began consultation to develop an amendment that would clarify and strengthen the Trade Practices Act in this area. The coalition’s component pricing legislation progressed to the exposure draft stage and was the subject of much consultation and comment from stakeholders on all sides on this issue.

This new legislation is intended to prevent businesses from creating the impression that a product can be purchased at a price lower than the price that it can actually be purchased at. Consumers should not have to search through the fine print or follow a trail of asterisks and symbols to find the actual price for a product. The ‘single price’, as it is known, should be presented prominently along with any other component costs the seller wants to list. This bill amends section 53C of the Trade Practices Act and amends section 75AZF of the act to ensure that it is consistent with section 53C. The bill also makes minor technical amendments to sections 6, 65 and 75 of the act.

The legislation before the House today would make it illegal for a business to make a representation as to the partial price of a product without also using a single figure to prominently represent the single price for that product or the total price for that product. A component price will still be permitted provided that the single price is also displayed at least as prominently as the component prices. The single price is defined as the minimum quantifiable price for the supplier concerned at the time the representation is made to the customer. For example, the single price for an airline ticket may comprise of $100 for the ticket, a $30 fuel surcharge and $20 in taxes and fees. To comply with this legislation the airline may advertise that the ticket is $100 but it must also prominently state that the total price is $150.

There will always be instances where the final price for a product or service depends on a number of variable factors. When this happens, the business will be required to display the minimum quantifiable price. For example, an airline may advertise a holiday to London as being priced from $2,300. Provided this advertised price represents the cost at which you could purchase the holiday, the advertisement would be legal. A traveller may choose to fly business class—as perhaps the member for Braddon may choose to do—stay at a more expensive hotel or travel during the busy period, making the holiday package more expensive. But in such a case the advertisement saying ‘from’ a certain price would not be in breach of the legislation.

Another common situation along the same lines would be where part of the price of the product is quantifiable and part is not. In this case, the explanatory memorandum indicates that the minimum quantifiable price should be advertised. To prevent deceitful or misleading conduct as defined in other parts of the Trade Practices Act, the business would also need to alert consumers to the fact that additional costs would be required for the purchase of the product. For the purposes of this legislation, a quantifiable cost is considered to be a cost that is easily converted to a dollar amount. The single-figure price must be specified at least as prominently as the most prominent of the component prices. This prevents the practice of hiding the total price in the fine print or in the second page of the printed representation.

Component pricing laws will not apply to representations between businesses. Business-to-business sales and business-to-government sales are not included under this legislation. Following on from this exclusion, subsection 6 clarifies that component pricing laws will only apply to goods and services that would ordinarily be acquired for personal, domestic or household use or consumption. Changes to section 75AZF of the act effectively replicate the amendments to section 53C, ensuring the criminal and civil provisions are consistent within the Trade Practices Act. In its initial draft this legislation only dealt with advertisements. The consumer advocate group CHOICE made a submission calling on the government to extend the reach of this legislation to all forms of representations. To the government’s credit, the legislation before the House today has been extended to cover all representations, including spoken and informal representations. There is nothing more frustrating than to be quoted a price over the phone, only to find that the price you were quoted is exclusive of a tax or another obligatory charge.

Another change from the 2006 draft is the exclusion of the financial sector from this legislation. In the two years since the Howard government draft bill was released, regulations governing the financial sector have been tightened. The sector has consistently claimed that financial products are unique compared to other products and services, and the decision to exclude the sector from component pricing laws has been welcomed by some. The bill also makes three minor amendments to the Trade Practices Act. The first deals with pyramid selling and amends section 6 of the Trade Practices Act to update cross-references to other parts of the act. The second minor amendment clarifies that a breach of a notice made in accordance with section 65E may be a criminal offence. The third technical amendment, this one in proposed new section 75AZAA, affirms that state and territory fair trading laws equivalent to part VC of the TPA operate concurrently with the Trade Practices Act provisions.

During my discussion with stakeholder groups, there has been widespread but cautious acceptance of the bill as it has been drafted. There will generally be a range of views on new legislation. Some industry sources believe the Trade Practices Act provides sufficient protection for consumers in its current form; however, these sources have indicated that the legislation as drafted is workable and provides only limited compliance and implementation costs. The legislation is very broad and will apply to a very large section of the economy. Some of the more ambiguous parts of the legislation will no doubt be tested in the courts in the near future, and it will be interesting to observe the implementation and development of these new laws.

One major issue that may become a problem is postage and handling. As the legislation is drafted, postage and handling costs do not have to be included in the single-figure price in most cases. The scope of the changes relating to sending goods to the customer is not prescribed in the bill. Where the goods may only be purchased by delivery and the delivery costs are known, those costs must either be included in the total or disclosed in the representation as a separate amount. For example, ‘$20 plus $5 postage and handling’, or ‘$25 including postage and handling’, would be acceptable. There is concern among consumer groups that the legislation does not define ‘handling’, creating a loophole in the new law. The possibility exists to offer, for example, a DVD for a small amount, maybe $39.95, plus a relatively large amount for postage and handling—say, another $20. Clearly, such a postage and handling charge would be considered excessive to post a DVD. This legislation leaves open the opportunity for a business to charge an exorbitant amount in relation to postage and handling without being required to include those costs in the single-figure price. One would expect the majority of businesses to act within the spirit of the legislation; however, it will be important to closely monitor whether this postage loophole becomes a problem.

Another issue that has been raised is the exception granted for the advertising of ongoing contracts. For example, a phone company may offer a service at $20 per month over 24 months. This is a total minimum cost of $480 over the life of the contract. Although the company must display this total figure, it does not have to be displayed as prominently as the monthly price and can be included in the fine print as is currently done on most ongoing contracts. At this early stage, this exception does not appear to pose a major concern. In my experience, most people are accustomed to looking for the total price in the fine print, and this exception will allow the status quo to continue.

The other major concern about this legislation is the potential for it to make advertising confusing and difficult to understand. Because the single price must be displayed at least as prominently as any component prices, there is the potential to have several large price figures cluttering an advertisement. The mixture of quantifiable and non-quantifiable costs could also make a price representation confusing. This legislation is intended to help customers make informed decisions about the products and services they purchase. The government needs to carefully monitor the real impact of this legislation to ensure that it does not have the opposite effect by causing confusion.

Overall, I believe that these amendments will have a positive impact on consumers. Without burdening businesses with high compliance costs, this measure will provide consumers with better information about the products and services they wish to purchase. It should also close the loopholes opened by the 2002 and 2003 court cases, and make pricing more transparent. The opposition will monitor the impact of this legislation on the business community and consumers, but we offer no objection to the passage of the bill through the House. We will certainly be interested to see the pricing legislation in practice.