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Tuesday, 14 October 2008
Page: 9110


Ms OWENS (8:19 PM) —The Trade Practices Amendment (Clarity in Pricing) Bill 2008 makes quite a small change but a significant one that will impact on the experience of consumers. It is a bill that delivers on an important pro-consumer and pro-competition reform. Essentially the bill will make it easier for consumers to compare prices and make decisions about which products to buy. In layman’s terms, it does so by effectively changing the rules that apply to businesses which choose to use component pricing.

Component pricing is a rather fancy name for a practice that has probably annoyed all of us at some time or other, and increasingly so, I suspect, in recent years. It is the practice of presenting a price for a good or a service in individual parts. For example, it might be X dollars plus taxes and fees and charges, and at times the addition of the taxes, fees and charges is in quite small print. It is possible, using that form of component pricing, for consumers to be misled, and it is also increasingly difficult for consumers to compare prices. I know I have spent considerable time on the phone digging down to find the real price of various goods and services in recent years and trawling through contracts looking for the hidden extra costs. In fact, it is possible that a consumer might not find out the real price of a good or service until they actually hand over their credit card.

Businesses that do provide full price disclosure to consumers may find themselves at a competitive disadvantage to businesses that do not, so this amendment to the Trade Practices Act introduces that pro-consumer reform but it also makes significant improvements in competition.

A common example that has been raised increasingly in recent years is that of airlines and the practice of using component pricing to advertise a fare in a way that relegates often significant taxes and charges to the fine print and leaves consumers in the dark. Consumers in my electorate have made similar comments about car hire firms, and consumers have been complaining. In fact, the ACCC received about 430 complaints in the last financial year relating to the existing section 53C of the Trade Practices Act, and those complaints were distributed across a wide range of industries. Similarly, Consumer Affairs Victoria has received around 250 complaints so far this calendar year.

The previous government were aware of this problem. They undertook two rounds of consultation on component pricing amendments in 2006 but they never got around to introducing the legislation into the parliament. This government is serious about empowering consumers and strengthening consumers’ right to know the total price of a good or service.

There are three essential benefits from this quite small change: the improvement of transparency in pricing, empowering consumers to make sure they know the true cost of the purchase and providing a level playing field for businesses advertising their goods and services.

The government has undertaken extensive consultation through submissions and follow-up meetings with business and consumer groups and made a number of key changes to the previous government’s draft legislation. For a start, there are a number of exemptions which the previous speaker referred to, and I will refer to them quite briefly. Business-to-business transactions are not captured under this amendment. This would allow, for example, for corporate price lists to be provided exclusive of GST. Financial services are exempt because there are mandatory disclosure regimes for financial services under Commonwealth, state and territory legislation, and amendments to this act might create confusion as to the operation of those regimes. We are also not about applying unnecessary burdens to business. Throughout the stakeholder consultation process it was argued that trying to include postage and handling costs would create quite considerable compliance burdens, particularly for online businesses, for very little consumer benefit. The reason for that is that the concept of postage and handling is relatively well understood by consumers. It is not a total exemption, though: where the price of postage and handling is fixed, that would be expected to be included in the price.

We are not banning component pricing in any way—it is still legal under this amendment bill—but the total price will have to be at least as prominent as the most prominent of any components of the price. This is because, as consumers, as we all know, it is the total figure that matters to us, not the small print—and we do like to know the total price before we hand over our credit card.

It is appropriate for a business to disclose a price in an advertisement or other representation and then link that price to a fine print disclaimer which effectively rules out that price. In summary, a business must not disclose that the price is $200 when a consumer could not actually get the product for $200—when they would have to pay more. It is a very small change relative to other changes in the Trade Practices Act but it will have real significance to consumers and will significantly improve competition.

Debate (on motion by Mr Hayes) adjourned.