Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

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.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Trade Practices Amendment (Clarity in Pricing) Bill 2008. The Trade Practices Act was a groundbreaking piece of legislation brought in by the Whitlam Labor government in 1974. It was a great initiative, and the late Lionel Murphy should be congratulated for that initiative during his time as the Attorney-General. It is fair to say that for decades Australia languished when it came to trade practices legislation, and consumers across Australia were subject, unfortunately, to unfair prices, abuses of market power and the violation of human rights really without much protection at all. They could go to court and argue the case, but a lot of consumers are not in a position to finance expensive litigation in the Magistrates, district or Supreme courts, let alone in the Federal Court. So having a watchdog like the ACCC, the Australian Competition and Consumer Commission, was a great initiative, and I know that body has been supported by both sides of the House. The stated aim of the Trade Practices Act is:

… to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

This is what the clarity in pricing bill is all about. It will ensure that Australian consumers get a fair go.

The Trade Practices Act has some tremendous parts to it which the ACCC administers and enforces: the anticompetitive behaviour provisions in part IVA, the consumer protection provisions in part V, and other parts that deal with unconscionable conduct in relation to commercial transactions and consumer dealings. It really is our protection code for consumers. Without it, just imagine where we would be. It is a tragedy that it took so long for us to have the trade practices legislation in the history of this country. The mid-seventies was simply too late. It took a Labor government to do it after 23 years of conservative rule from 1949 to 1972.

This particular piece of legislation seeks to amend the Trade Practices Act 1974. It relates to the use of component pricing in representations by businesses to consumers. It is not business to business; it is business to consumers, so it is all about the protection of consumers. It deals with part V, section 53A, which is the provision in relation to the cash price to be stated in certain circumstances, and section 75AF, which is about the liability for defective goods or loss relating to other goods. The measures contained in this particular bill will clarify that when a business makes a representation to a consumer about the price of a good, or a service for that matter, to the extent that it is possible to do so it must disclose as a single figure the total price of that good or service. I think that is what consumers expect, that when they go into the supermarket or they buy a car or they purchase an airline ticket and the price is there, that is what they pay. I do not think they expect to be ripped off by hidden taxes, levies or charges. I think they want honesty, transparency and openness when it comes to business transactions. When they purchase goods and services, that is what they want. We have seen that in a lot of the professions, where there are contracts in accountancy, in law and in other areas where consumers are expected to be given information about that. We have seen it in the purchase of real estate, certainly in Queensland. There are provisions in relation to cooling-off periods. So everything about protecting the consumer is a good thing in our society because consumers compared to businesses are in an unequal power situation.

This legislation will put an end to the practice of consumers being ripped off by hidden fees and charges. It delivers an important reform to empower consumers to make the best choices that they can undertake with the limited cash that they have. It provides clarity and certainty to consumers across our country and I warmly welcome it, as I am sure my constituents in Blair do also. It is important because we need to know the prices of the goods and services that we are purchasing. It is sad that, notwithstanding what the member for Cowper said, the previous government really did not take this issue and run it to conclusion. In other words, it has been left to us to introduce this piece of legislation when they knew about it and the problems associated with clarity in pricing for nearly their 12 years of sitting on the government benches. The former government failed to act on this important issue to strengthen the consumer’s right to know the total price of a good or service. The former government talked about reform, they consulted, they discussed it, they cogitated, they meditated—but they did not act. They did almost nothing. We had periods of inactivity, idleness and in fact ignorance on the issue.

Consumers across this country will welcome the legislation because consumer protection is important for all Australians. I know when I conduct my regular mobile offices around my electorate, in the rural areas as well as in Ipswich, that consumers are frustrated. They are frustrated when a product that they buy is not the price asked when they go to the checkout. Recently my 17-year-old daughter Jackie had that experience. I will not name the business in my area, but she had that experience as a young woman 17 years of age. My wife and I have trained up both our daughters—the elder is 19—to have the kind of certainty and frankness and candour to purchase items. We have not trained them to be reticent about these issues.

My daughter was recently confronted by circumstances where there was an advertised price for a certain product that she was purchasing but when she went to the checkout there were all these hidden charges. I saw the distress that my 17-year-old daughter felt when she had to rely on money from my own mother, her grandmother, to help her to pay for that purchase. Clearly, when you looked at the advertisement, it was wrong. It was misleading and mischievous. We just cannot have this because we cannot have our young people and other people in these circumstances facing these sorts of problems. If a business advertises a price to a consumer, it should display a single figure if at all possible. The total price of the product, to the extent that it is quantifiable, must be there on the counter at the store. Representations must be accurate, and this measure will ensure that consumers throughout Australia can be certain of the total price they will have to pay for the goods and services before they enter a transaction. As the Minister for Competition Policy and Consumer Affairs and Assistant Treasurer outlined in his second reading speech, this bill will ensure that the total price a consumer has to pay will be ‘prominently stated, not just lost somewhere in a footnote’.

The bill clarifies the practice of component pricing, which is currently regulated by section 53C of the Trade Practices Act. Component pricing is the practice of advertising prices as the sum of multiple component parts. In other words, $A plus $B equals a certain amount. If a business uses component pricing and does not provide a clear total, consumers are less able to readily compare the goods and services on offer. In fact, they are given a false impression—they are misled to believe that goods and services are cheaper than they actually are. Unfortunately, it is the case that some businesses deliberately use component pricing to mislead consumers about the real cost of a product or service. What do they do it for? They do it to get the consumer in. They do it to gain an unfair competitive advantage over other businesses that are honest, frank and transparent in making full disclosure to consumers. Because of these unscrupulous practices, it is crucial that we regulate component pricing. This bill will ensure that there is a level playing field for businesses advertising their goods and services, and that businesses which are doing the right thing and complying with component pricing laws are not disadvantaged. The bill seeks to amend the Trade Practices Act to clarify the operation of the existing component pricing provisions.

Sometimes courts do strange things. I had a look at the two decisions that were made by the Federal Court in relation to this particular matter. It is quite extraordinary what the court found in the two decisions which were referred to by the member for Cowper. In 2002 the Federal Court found that the existing section 53C did not require the disclosure of a single-figure price, provided that a total price could be obtained without the consumer needing to perform a ‘complex calculation’. What an extraordinary decision! I must mention that the court’s finding was inconsistent with previous legal advice obtained by the then coalition government, as well as the ACCC’s own approach to enforcing the legislation. For this reason alone I welcome the bill. As the Assistant Treasurer stated, it will give effect to the original intention of section 53C.

While the focus of this bill is about protecting consumers from being ripped off, it also includes some practical provisions to assist business. First, business will only be required to state the minimum quantifiable consideration for supply. Basically what this means is that, if the business cannot genuinely determine what, say, the taxes, levies or charges might be for some other component of the price, the business will be able to make a price representation which would not require them to state the total price. Of course, though, they would still have to make it clear the type of additional charges that might be incurred. Secondly, the bill exempts businesses from stating charges related to sending goods from one supplier to the customer. That means that genuine postage and handling charges need not be included in the single-figure price. Thirdly, financial services are not covered by the bill. Fourthly, the provisions in this bill will not apply to representations which are in between bodies corporate.

The Assistant Treasurer in his press release on 25 September 2008 said that this legislation will ‘tackle the problem of hidden fees and charges for consumer products’. He went on to state quite clearly:

It is not appropriate for a business to represent that a product costs a certain price and then use fine print disclaimers to reveal additional mandatory taxes, fees or other charges.

The exposure draft of the bill was released for public consultation in March 2008. There were a range of comments received and made by a group of businesses and consumer advocates—stakeholders who were interested in the legislation represented to the government their respective positions. The government was clearly of the view that the bill should not impose unnecessary compliance burdens on business, and that is why the four provisions I outlined are there in the bill.

It is important for us to say, as the minister said in his press release, that gone are the days when we front up to a business and just wonder what the fees and charges might be. We expect in our society that we should pay the price that is offered. We want transparency and openness in our consumer transactions.

It is interesting to note that in 2007-08, the ACCC received about 430 complaints relating to the existing section 53C of the Trade Practices Act. It is notable also that Consumer Affairs Victoria has received about 250 complaints in this calendar year. Those complaints ranged across a variety of industries. Any example of this is unacceptable. Even though, as I said, the previous government undertook a number of rounds of public consultations, there was no legislation introduced to this parliament. It is the Rudd Labor government which is ensuring that this legislation, which will protect consumers, is before the chamber.

I warmly welcome this bill. It will increase transparency in pricing, empower consumers and give them the best chance possible to purchase goods and services on a competitive basis. That is good for the electorate of Blair and it is good for electorates across the country. It will prevent consumer disadvantage and we will not unnecessarily burden business with compliance. It will ensure in this very difficult time, with a global financial crisis upon us, that our consumers will not be left behind and will have access to the kinds of rights that a decent, fair and just Australia should have.

We will be empowering those who are less fortunate, those who have little financial power, by giving them the chance to equalise that power relationship. We will bring our legislation into the 21st century. This piece of legislation, though minor, will have a huge impact on the day-to-day lives of Australians. I think that in years to come we will look back on this piece of legislation and say, ‘This was a small change, but it was a big change to the way we do business in this country and it was a big help to consumers.’ I warmly commend the bill to the House.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak on the Trade Practices Amendment (Clarity in Pricing) Bill 2008. Consumer protection is clearly a matter of critical importance to the Rudd Labor government. We know that mums and dads around the country, their children, their parents, the people for whom they care, are the people who are at the very heart of this federal government’s work of modernising Australia for the 21st century. We have all heard about the different policies that the Rudd Labor government is delivering. We all know about the education revolution and the vital inclusion of information technology within the classroom and at home. What better typifies this government’s focus on preparing our population for what will be a dynamic and challenging century?

There are initiatives that the government is pursuing, such as the education revolution, that will better prepare people for the future. There are also many initiatives that deal with the present and that focus on everyday consumers—mums and dads and those that they care for. Yes, things have become increasingly tough for people since the introduction of the GST, but, to this government’s credit, as we have heard today, it continues to provide tremendous support to multiple sectors of the community through the $10.4 billion Economic Security Strategy. Through this Economic Security Strategy the Rudd Labor government is caring even more for pensioners, as we heard today, helping first home buyers more than those opposite would have dreamt of and of course providing additional support for 1.9 million families and 3.9 million children.

This clearly is a government for all Australians. In addition to redistributive measures, the government has just recently released its green paper on financial services and credit reform. This reform will lead to a reduction in the vast proportion of unsolicited offers of credit cards and unsustainable increases in available credit. This in itself will protect tens of thousands of Australian households from unscrupulous financial behaviour.

But tonight I rise to speak in favour of the other initiative that I mentioned at the beginning of my speech, designed by this government for the financial protection not just of the mum and dad consumers around the country but of all people who wish to make a purchase—that is, the government’s Trade Practices Amendment (Clarity in Pricing) Bill 2008. The practice that this bill will address when it becomes law is the practice of deceitful quotes. These are quotes that are made by the seller of a product or service with the full knowledge that the price that is being quoted is totally wrong and is substantially less than anyone would end up paying. The practice of misrepresenting the true cost of a purchase to the consumer, at least in this case, is called component pricing. The quote consists of part of the full purchase, but certain things are left off the quote, such as taxes, fees and charges, to make the purchase sound better value and more affordable. Retailers may as well have been giving potential customers two prices—one accurate, that the person will eventually have to pay for the product, and one totally made up, fictitious and misleading.

It is generally the lower of any two quotes that a person will remember. So we could effectively have retailers answering the question ‘How much does it cost?’ with the answer: ‘I’d say only $12.99, but then again it could be $20 when you add other costs such as taxes and fees.’ Handing over a credit card would result in a shock for the consumer either at the time they are expected to sign the credit purchase slip or when they realise that they were ripped off maybe a month or three later when their statement comes. The deceit of this practice is what the government is targeting in this bill.

I note as an aside that the previous government looked at this issue during the course of its time in government. The Howard government announced that in the first half of 2005 it intended to do something about component pricing. A year later it released a draft bill and explanatory memorandum for public consultation. The bill was up on the Treasury website for some years, but the issue was allowed to drift without the prospect of any form of resolution.

It was a constituent of mine who brought the stalled legislation more sharply to my attention. Mr Colin Leaker of Somerton Park has pursued this issue since around mid-2005. I quote from some of his letters regarding component pricing and the stalled bill:

… my recollection from the early press reports is that no particular difficulties were flagged at that time in regard to implementation.

…                     …                   …

My strong view is that the legislation is urgent and important to consumers.

I am pleased to be able to inform Mr Leaker in my electorate that the Rudd Labor government has this situation, like so many others, well in hand. Those opposite, after doing the hard work, decided that they did not support their own bill back in 2006. If they think back and remember the merits of the initiative and how it got through their party room, perhaps they will remember that they were supportive of it at some stage. Here and now they can vote for it. Most importantly, I ask all members to think of the mums, dads, children, families and consumers around the nation and support a legislative measure designed to offer protection to support all those consumers. I commend the bill to the House.

Chris Trevor (Flynn, Australian Labor Party) Share this | Link to 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.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise in support of the Trade Practices Amendment (Clarity in Pricing) Bill 2008, which seeks to amend the Trade Practices Act 1974 and to enact certain changes that will seek to bring greater clarity in relation to pricing, in particular in relation to component pricing. I should begin by trying to provide some background to this notion of component pricing, which is the practice of representing the prices of goods and services as the sum of the individual components. I think we are all very much aware of this method of pricing. It is a method that I think most of us at one time or another have either been deceived by or at least been misled by. Sometimes that has led to purchases having been made; in other cases it has not. We have seen this practice quite regularly in the past. I know I have seen it in relation to airfares in the newspaper or on television. Up flashes a big price—a headline price—saying how much it will cost for a ticket from X place to Y place and you normally see a very big asterisk next to that price.

To some extent, a combination of that traditional notion of caveat emptor and the fact that, on too many occasions, so many of us have been stung by misleading practices in the past often has meant that we are a little bit more sceptical about these things and we do seek out further information. Often we seek out the fine print. Many consumers unfortunately learn those lessons the hard way. What this amendment is seeking to do is to try to ensure that people do not have to learn the price of goods and services that they are seeking to acquire the hard way, by having forked out more money than they were anticipating because of misleading advertising or representations that were not necessarily untruthful but were less than complete in their disclosure of the price.

In relation to the significance of this, I note that there was an article in the Sydney Morning Herald on 12 January 2008 under the headline, ‘Law to expose hidden pricing’. It is unclear to me in a sense whether or not the particular case outlined in that article would have been caught by the existing component pricing provision—specifically section 53C of the Trade Practices Act. But what struck me in this article was the discussion about the advertising of airfares on a website, travel.com.au. The article did not seek to make any adverse inferences about that particular website, but it did contain a breakdown of the different components of an airfare which was a Sydney to Auckland return ticket. In that case, the base fare was $226. In addition to that, there were other charges of $229 in fees, including a $120 fuel levy. So in this particular case we see associated fees and charges actually exceeding the amount of the base fare. From the information available, I am not clear whether that information was presented to consumers in a fashion where they could discern whether or not that was the case. What we do know is that, with the passage of these particular amendments, we will see changes to section 53C of the Trade Practices Act that will ensure that there will be no doubt that consumers will understand the single price, the true price, the price that they will have to pay—the amount of money from their pocket that will go towards securing that airfare. When you consider the significance of those figures—that is, an increase of over 100 per cent in the price, if you believed the base fare to be the correct fare—it is critical that these amendments be passed. They will go a long way, I think, towards ensuring that consumers have complete disclosure of the cost of entering into a particular transaction.

Why enter upon trying to pass these amendments? There are a couple of reasons for that. The first one concerns the existing section 53C of the act. I think it would be fair to say that the original intention of that section was to cover cases of the sort that are now under consideration and that this amending legislation seeks to redress. If we have a look at the existing section 53C, that section states:

A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the corporation also specifies the cash price for the goods or services.

I think that most people observing that statement would perceive the cash price to be the amount to be paid. Certainly, if you look at the explanatory memorandum that accompanied the legislation that introduced section 53C in the first instance, I think the intention back then was clearly that the changes we are now trying to introduce should have actually come into effect back when section 53C was first introduced. Let me read from the explanatory memorandum:

… the new section 53C prohibits a corporation advertising part only of the consideration payable for goods and services without disclosing the total consideration for which the goods and services may be purchased outright. This provision is directed at a trader advertising that a consumer may buy a product for a low deposit without disclosing the total price payable.

Perhaps it was that final sentence that created the mischief, but I think that, read as a whole, that statement is—certainly as I read it—a clear assertion of what the original intent of section 53C was.

Notwithstanding that, clearly the courts have taken a different view. There has been varied judicial opinion on this particular point but I note that, in the Dell case and other cases—I think the other relevant case was Australian Competition and Consumer Commission v Signature Security Group Pty Ltd—the decisions handed down seemed to imply that section 53C should be interpreted as having a slightly different meaning from that which the original legislators and draftspeople intended. That has created the situation where the provision that sits on the statute book does not reflect the original intention or what the community standard would also require that interpretation to mean.

The other question is: is this a particular problem? If it were simply a case of the courts interpreting the matter in a way that had an intention contrary to the original intention of parliament, it may not have been such a problem. But it is a problem in this case because of the large number of complaints that the Australian Competition and Consumer Commission received in relation to these types of matters. I note that during 2007-08 the ACCC received around 430 complaints relating to the existing section 53C. That is a significant number of complaints. In addition to that we have seen some figures that have been collected by Consumer Affairs Victoria which demonstrate that around 250 complaints have been received in relation to these types of matters so far this calendar year. It is not a trivial or insignificant matter. It is not one that is not generating some disquiet within the community. It is one that is creating real concern, and that is why it is incumbent upon us to act and to do what the previous government failed to do—that is, take decisive action in relation to this measure.

That provides us with some of the background to why it is important that we pass these amendments, but I want to make one additional point. This is a crucial amendment. Section 53C, as originally intended and as we hope it will exist after this legislation is passed, is designed to do two things. First and foremost it is about providing consumers with protection. I think that is self-evident. All of the speakers in this debate so far have focused on the fact that this is a measure that will provide consumers with protection. Equally—we should not lose sight of the importance of this matter—this is an important measure because it is pro-competition. Let us not forget that most of the advertising that has led to this particular problem has been in fairly competitive markets where individual competitors are seeking to gain an advantage over other rivals within the marketplace. I mentioned the airline example a little bit earlier. The growth of some of the low-cost carriers in particular has driven increasing competition within this sector.

It is an important competition measure because, quite frankly, it is unfair to have certain competitors out there in the marketplace not fully disclosing the complete cost to the consumer when others are doing the right thing by consumers. Ultimately, in a competitive marketplace you are likely to see all competitors end up going down the path of trying to achieve the same benefit by hiding the ultimate price. I would like to quote from another article. This article was in the Sydney Morning Herald back on 11 October 2005. There was a discussion in this article under the headline ‘But wait, there’s more’ about the various practices within the airline industry:

Virgin Blue’s chief executive, Brett Godfrey, says the airline has always been a strong advocate of all-inclusive pricing, but “was forced” earlier this year to follow the advertising practices of other carriers in order to remain competitive.

That is evidence of the point I have just been making. If we have a situation where this is not prohibited and it is allowed to occur then in a competitive marketplace all of the competitors will be seeking to get the jump on their rivals by engaging in the same sorts of practices. So it is a competition issue. But, ultimately, where there is that level of competition and insufficient disclosure, it comes back to being an anticonsumer set of arrangements, and that is why we are acting on this particular measure.

I want to reflect on some of the elements of the bill. In particular, it is worth noting that these provisions will only apply to partial price representations made by business to consumers. So business-to-business transactions will not fall within the net of this particular section. It is also worth noting that there is an exemption for financial services, and this is largely—though not completely and totally—as a result of the existence of section 12DD of the Australian Securities and Investments Commission Act, which essentially mirrors the sorts of provisions which are contained within section 53C of the Trade Practices Act. In the ASIC Act those provisions relate specifically to the provision of financial services. It would be inappropriate and confusing to both business and consumers if there were an overlapping set of arrangements that were to intervene so far as financial services were concerned.

There are exclusions in relation to postage and handling, although it is worth noting that the bill does provide that the charges for sending the goods from a supplier to the consumer do not need to be ordinarily included in the total price. However, if the postage cost is known by the business and the postage cost is compulsory then the provision requires that the business must disclose that price in the representations that they make to the consumer. So in cases where that cost is not ascertainable and where it is not compulsory there is no requirement, but where it is ascertainable and it is compulsory it must be disclosed.

It is important, I think, to note that the bill does not prohibit the use of component pricing per se. What it does do is require that, if a business chooses to use component pricing, that business must also state the total price that the consumer would have to pay to acquire the goods or services. Importantly, in cases such as this the total price will have to be at least as prominent as the most prominent of any of the components of the price. So, going back to the airline advertisement example, if on the screen it flashes up ‘$99 for a trip to the Gold Coast’ with a big asterisk, that would not be acceptable anymore. If the total cost of the airfare were $200 then it would have to flash that up in writing equally as large or at least as prominent, however the judiciary might ultimately interpret that. I think ‘at least as prominent’ would warrant much more than an asterisk, and in the end that is what we are hoping to achieve. There is an exemption in relation to the ‘at least as prominent’ requirement in terms of disclosure, and that in particular relates to contracts for services where the services are provided over the duration of the contract. These particular contracts will generally involve periodic payments, and typically they involve contracts for telecommunications services, subscription TV and other services of that nature.

I think, all in all, this particular proposal is one that is worthy of the support of this parliament. It is one that strikes an important balance between the need, on the one hand, to not overregulate business and the need, on the one hand, to ensure that, on the other hand, consumers are protected—that consumers are able to approach transactions on a ‘what you see is what you get’ basis, which I think is one of the key objectives of most consumer legislation. In addition to that, it is a measure that will ensure that competition can occur in a way that does not adversely impact on the consumer’s ability to know ultimately what they are signing up for when they enter into a contract. That is what these amendments are about. They do it in a sensible way. This does reflect decisive action on the part of a government that has only been in power for less than a year but has grappled with an issue that its predecessor had fumbled with for so long. I commend the bill to the House.

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

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.