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Tuesday, 11 November 2008
Page: 55


Senator STEPHENS (Parliamentary Secretary for Social Inclusion and the Voluntary Sector and Parliamentary Secretary Assisting the Prime Minister for Social Inclusion) (6:12 PM) —I thank the speakers who have contributed to the debate today, because the Trade Practices Amendment (Clarity in Pricing) Bill 2008 is an important piece of legislation which enacts a measure that will ensure consumers throughout Australia can be certain of the total price that they have to pay for goods and services before they enter into a transaction. This is an issue that has been before us all in various stages. As Senator Xenophon said, it was introduced by the previous government, and it has been amended by this government in consideration of some of the issues that were raised in the committee stages.

We understand that consumers need certainty and clarity. Component pricing, as we know, is the practice of displaying the price for the product as the sum of the multiple parts. I recently saw this in one supermarket where they have started this practice of identifying the taxes, fees and charges associated with some services. It is quite an interesting phenomenon that consumers are becoming much more educated and critical in their comparative analysis of the pricing practices of retailers. But the practice has the potential to draw consumers into purchases based on prices that do not actually fully reflect what they will ultimately have to pay, so it is a consumer protection measure that we feel very strongly about.

Senator Xenophon mentioned the issue of cheap airfares, which is probably the most widely recognised form of component price advertising. We believe that additional compulsory fees and charges should be disclosed, not just in fine print disclaimers, particularly when those additional compulsory charges may be significantly larger than the component price that is highlighted. The amending legislation actually clarifies the operation of the provision that is currently regulated in section 53 of the Trade Practices Act.

The government believe that it is fundamental that every consumer knows how much they are going to pay when they make a purchasing decision. This measure will ensure that, when a business states the partial price of a product, they will also be required to state the total price as a single figure, to the extent that it is known and quantifiable, at the time the representation is made. The bill does not prohibit component pricing. Businesses can continue to list components of a price but this bill will ensure that, wherever it is quantifiable, a total single price must also be provided and in general it must be displayed at least as prominently as the most prominent of any component of price. This measure will ensure that the total amount the consumer will pay must be prominently stated, not just lost somewhere in a footnote. It means if a consumer is drawn to a different, highlighted price then the actual price must also be abundantly clear.

As previous speakers have highlighted just the key provisions of the bill, I want to quickly summarise them. The bill will replace existing section 53 and its associated criminal offence provision, section 75AZF of the Trade Practices Act, and the proposed provision will apply to all representations about price made by business to consumers. The bill requires disclosure of a single figure minimum total price to the extent that it is quantifiable, as I said. In practice the total price that a consumer will pay may depend on optional extras or bundled products that the consumer chooses to purchase. Clearly, these decisions cannot be known by a business in advance. So where there are a range of compulsory but varying charges which the consumer can choose from, a disclosure of the type ‘from $500’ will remain an acceptable representation of price. The total minimum quantifiable price must be stated as prominently as the most prominent of any other price amounts relating to the purchase. This prominence requirement does not only apply to written price representations. The total price must also be prominent, particularly in relation to television or radio advertisements where the price might be spoken, as well as or instead of a written figure.

While the objective of these amendments is to prevent consumer detriment, there are a number of practical considerations that have been incorporated to assist business in complying with the proposed provisions. I note that Senator Xenophon asked questions about the impact on businesses. That has been very much in the government’s mind. Firstly, businesses are only required to state the minimum quantifiable consideration for supply. This means that if a business genuinely cannot determine what the taxes or some other component of the price on a purchase will be when they make a price representation then they would not be required to state them in the total price. Secondly, the bill provides an exemption for charges relating to sending the goods from the supplier to the customer. Such charges, which include genuine postage and handling charges, need not be included in the single figure total price, although they may be included if the business so wishes.

Thirdly, financial services will not be covered by this bill. Currently, section 12DD of the Australian Securities and Investments Act 2001 mirrors section 53C of the Trade Practices Act. It is not the government’s intention to amend the ASIC Act at this time. This will allow the current disclosure regime for the financial services sector to continue. Fourthly, the proposed provision will not apply to representations which are exclusively between bodies corporate. Generally, business customers are less likely to rely on headline prices than general consumers. Any benefits associated with clearer pricing strategies would be likely to be outweighed by reducing flexibility in business-to-business ability to determine the most appropriate format for representing prices.

In conclusion, we believe this is a very balanced measure from a government which understands the regulatory burden and which seeks to minimise its impact on business wherever possible while at the same time delivering the best outcome for consumers. Consumers and industry groups have been heavily consulted on this measure, firstly by the previous government and then again by this government through a draft exposure bill and ongoing discussions with interested stakeholders. The broad support from both consumer and industry stakeholders on the bill is testament to the thoroughness of this consultation.

The bill will ensure that consumers will know how much they are really going to be asked to pay when they see an advertisement in the newspaper or on television or are given a quotation. This measure increases transparency in pricing and further empowers consumers to make the best purchasing choices possible.

I will go directly to Senator Xenophon’s concerns and the questions he asked. In relation to his first question about consumers being advised, I am advised that section 53E ensures that retailers must not mislead with respect to the price of goods and services. This can cover non-quantifiable components. Secondly, compliance costs comply with the government’s regulatory impact analysis requirements and, as I said, industry and consumers have been widely consulted on both the exposure draft and the final bill. Treasury’s advice to government is that this measure has minimal compliance costs because most businesses’ price representations already comply with the measure. The bill only targets shonky pricing representations, such as those raised by Senator Xenophon in relation to low airfare prices. With that, I commend the bill.