Chris Trevor (Flynn, Australian Labor Party) Share this | Hansard source

I rise to support the government’s Trade Practices Amendment (Clarity in Pricing) Bill 2008. The proposed bill represents a much welcomed and long-overdue correction to the current method of doing business. It provides a clear correction to a system that was letting consumers down, particularly the most vulnerable of consumers in our communities.

The Trade Practices Amendment (Clarity in Pricing Bill) 2008 aims to amend the Trade Practices Act 1974 and close the loopholes for advertising and business promotion that have been identified in the Trade Practices Act and its interpretation by our courts of law. The main purpose of this new bill is to ensure that businesses prominently display a price for their product or service that is actually a fair and reasonable representation to the customer of what the total and actual cost would be to acquire that product or service.

All too often with recent modern methods of corporate communication and advertising we see a figure promoted as the price and, ultimately, the expected cost to the consumer to acquire this product, only to be bombarded with fine print, asterisks, notes, disclaimers and other notable quirks and gimmicks used to hide the actual cost that the consumer must pay. It would be fair to say that, as we who are trained in the law often say, the devil is in the detail.

As an emerging trend, we see the use of what has been termed ‘component pricing’. I note these are more popular in certain industries, including airlines, car sales and car rental operations. Component pricing is the term used to refer to the practice of representing, or perhaps misrepresenting, the price of a good or service that does not accurately reflect the bottom line dollar value that the consumer will pay to acquire this good or service. The rise in the frequency and use of component pricing has seen many businesses represent the price of their goods or services as a sum of individual components—that is, to not take into account fees, taxes and charges, even if these form an important or even compulsory part of the price. They can be omitted from the advertised price and this can lead to confusion for honest consumers in the marketplace. Consumers can be misled as to what the actual cost is or what will ultimately be included in the finished product. This makes it difficult for consumers to compare prices and can impair their decision-making process, especially for the comparison of homogeneous products when trying to make a decision based on price. It is like a consumer comparing apples with oranges.

Consumers may even be blatantly misled by business operators into thinking that the cost for their purchase is going to be less than it actually is. By allowing this kind of trading environment to prosper, businesses have distorted the wheels of competition to the point where it is merely the clever form of marketing and promotion that has contributed to their competitive advantage and success and not the strength of the product or service that they are providing to the consumer. This, of course, is a big problem and its increasingly common occurrence frightens me. And it is not just me who is clearly troubled by this. Our national consumer watchdog, the ACCC, received 430 complaints in 2007-08 relating to this sort of problem. This illustrates the problem with the current Trade Practices Act legislation, which was supposed to protect consumers, and the need to amend the current legislation. Of course, many more incidents would have gone unreported by consumers.

This is where the Trade Practices Amendment (Clarity in Pricing) Bill 2008 steps in in an effort to create a more just trading environment and to help guide consumers’ decision-making process as they cast their dollar votes in the marketplace. The bill will increase the transparency in which businesses are able to advertise the price for their goods or services. It will do this by prohibiting businesses from using a component price structure on their advertising and promotional material without also representing the total cost or single cost to the consumer. The bill does not ban outright the use of component pricing for businesses, but rather states that if they choose to use component pricing then they must also include, simultaneously, the single-price figure as well.

The bill also states that should a business choose to promote its total price alongside its component price then the total price must be as prominent as the component price. This is an important part of the new legislation as it puts an end to the fine print, the asterisk and that devil-in-the-detail problem that I spoke about earlier. And finally, a clear, prominent and honest price is portrayed to consumers, who can then freely compare and evaluate products and services and cast a much more efficient dollar vote in the marketplace. This will improve competition and force businesses to compete in a more honest fashion, focusing more on the actual product or service being offered for sale and less on gimmicks and disclaimers to lure the unwary customer.

To illustrate the magnitude of this problem as it currently exists, and just how deceiving component pricing can be, I have recently been told of a product—an airfare, to be exact—advertised on the internet. The component price of this airfare, and the advertised price, I must add, was $999. However, in the fine print was a statement that there was also an amount of $957 to pay in addition to the advertised price of $999. How can it be that only half of the actual cost to the consumer was advertised as the most prominent price, with nearly twice the amount actually payable by the consumer, as opposed to what should have been advertised by the supplier? It is unjust and unfair that this sort of practice has been able to continue for so long, and I am surprised, to be honest, that is it has taken so long to intervene in this matter—obviously a hangover from the previous, coalition government. If a consumer is not able to bargain or negotiate with the supplier to purchase only part of the good, why then is the supplier able to fool the consumer by advertising only part of the price?

There will of course be times when a business legitimately and reasonably will not, at the time of sale, be able to quote the exact price the consumer will have to pay, or this exact amount may not be readily available. I am happy to say that this new bill takes into account such instances, and, should this be the case, a business will have to state the components of the price that are known at the time of representation. Of course, to comply with current trade practices legislation, the business must also state that other charges may apply, as well as the nature of these fees and charges. I also note that, when preparing a single price for promotion to the market, a business will only be responsible for including those fees and taxes that they are collecting on behalf of the authority or third party. That is to say businesses will not be responsible for including amounts in the single price that would be imposed on the customer directly by a third party. It is considerations such as these that I feel are important aspects of the legislation. It is not the intent of this bill to create a large and unwarranted cost of compliance for businesses. It is not about creating red tape but rather increasing transparency.

To get to the point we are at today, the government has undertaken extensive consultation with both business and consumer groups. This is a government that believes that we can help consumers and that this does not have to be to the detriment of business. It is through this consultation period that the government has shown leadership and has acted and introduced several key changes from the original draft legislation. As a result of input from businesses, important compromises have been made, such as the exclusion of postage and handling charges, the exclusion of business-to-business transactions and the exclusion of financial services from this act.

I feel that it was a welcome suggestion to exclude postage and handling charges, should they not be compulsory in the transaction itself. However, where payment of a delivery fee to the supplier is compulsory and there are no alternative distribution methods available to the consumer, this new bill will deem it necessary to include this charge in the single figure. Excluding reasonable and voluntary postage and handling or distribution costs will of course benefit those businesses that choose to participate in the digital marketplace. Adding to the bill to force these types of suppliers to include postage costs would only see them unfairly burdened, with little consumer benefit as a result. Obviously, postage charges are a concept that is relatively well known and well accessed by the Australian consumer.

I feel it has been an important step to exclude financial services from the act in an effort to avoid duplicating governing laws that apply to this industry. The provision of financial services is already governed by the Consumer Credit Code, along with other Commonwealth and state or territory legislation. This legislation is amongst the most rigid and pro disclosure orientated in Australia. Consumer orientated financial services of course must disclose a comparison interest rate and include product disclosure statements, terms and conditions, and fees and charges during the decision-making process. I feel that this is a role model for disclosure for other industries to aspire to.

A good indicator as to the need to implement this new bill and as to the effectiveness of the structure of the bill has come in the way of consumer advocacy groups strongly supporting this move. CHOICE, the longstanding pinnacle of consumer education and protection, has publicly supported any measures to increase the ability of consumers to receive information that can help them decide which products to consider prior to dealing with a particular supplier. I am pleased to comment that the Trade Practices Amendment (Clarity in Pricing) Bill 2008 does just that by improving the communication method by which price is promoted. Another consumer advocacy organisation, the Consumer Action Law Centre, has welcomed the government’s new bill and comments that it will help ensure that businesses represent an accurate, single price to consumers.

It is with the many benefits to the consumer and the low burden of compliance for business that I commend the Trade Practices Amendment (Clarity in Pricing) Bill 2008 to the House and I commend the Rudd Labor government for its outstanding leadership on this issue.

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