George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

The Trade Practices Amendment (Clarity in Pricing) Bill 2008 amends section 53C of the Trade Practices Act, which requires the full cash price to be stated in advertising the price of goods and services. The policy of section 53C was originally directed at the promotion of goods and services on time payment to require suppliers to stipulate the full cost rather than merely the periodic payment and to allow consumers, especially less-sophisticated consumers, to make a meaningful comparison of prices with similar goods.

However, recent decisions in the Federal Court have thrown some doubt on the efficacy of section 53C, in its current form, to require a single price to be stated. In two cases, Australian Competition and Consumer Commission v Dell Computers Pty Ltd and Australian Competition and Consumer Commission v Signature Security Group Pty Ltd, the court held that quoting a compound price—that is, the price of the goods plus another compulsory component such as delivery costs or GST—did not contravene section 53C. Those decisions led to complaints that businesses were being permitted to engage in a form of bait advertising by promoting a cheap price which did not adequately disclose the existence of fees, charges and taxes. The former government, the Howard government, prepared amendments to address these concerns, which were ultimately not proceeded with pending a Productivity Commission report into consumer policy. That report was not released until after the change of government.

While this bill does not exactly mirror the former government’s proposed amendments, the policy underlying it is very similar. The principal differences between this bill and the former government’s proposed measures are: the removal of postage and handling charges from the scope of the amendments, exempting financial services, and confining the prohibition to consumer transactions. It is possible to quibble over these differences but, on balance, the opposition is satisfied that the bill addresses the major problems that have been identified since the decisions in the two cases I have mentioned. In relation to financial services, the former government enacted a comprehensive disclosure regime under the Corporations Act. Financial products and business-to-business transactions typically involve more detailed consideration of the costs than most consumer transactions, which are often made impulsively and are simpler.

The amendments will prohibit a corporation from making a representation as to price of goods or services without also specifying the single figure price a consumer must pay in order to obtain the goods or services, to the extent that a single figure price is quantifiable at the time the representation is made. It is not intended that corporations should be prohibited from using component pricing at all but rather that a single figure should be disclosed at least as prominently as the other components of the price. This will enable consumers to more easily compare like products or services and to make informed purchasing decisions. The opposition supports this bill. (Quorum formed)

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

In dealing with issues addressed in the Trade Practices Amendment (Clarity in Pricing) Bill 2008 it is very important that we try to bring honesty back into the system of the sale of products. It has been quite evident that, in the past, more and more clouds have been cast over the way products are sold. It has always been the intention, especially of the coalition government, that the consumer would have a right of clear transparency when purchasing products. There have been occasions in the past when this has become obscured by the break-up of goods into parts and the identification of prices of the particular parts has been a mechanism of deception and concern. I think it is imperative as we go forward with this legislation that we acknowledge that trade practices law in Australia has got to march up to the world where we are living. We are living in the 21st century and, ipso facto, the market at times, not always, does fail and the capacity for the market to redeem or fix itself is lost.

Obviously, if we truly had a pure market with easy entry, with easy exit and with a capacity for new entrants to come in and bring a position of honesty into the market then the reliance on the Trade Practices Act would be limited and, in a perfect world, would not be required. But so often in trade practices law, in the life of commerce, the centralisation and the inhibitors that come to easy entry and easy exit in the market mean that the government does have a role. It has a role to step in and act as a conduit to the forces that are not there, to try as best it can to mimic what a free market would be able to do. It has always been the contention of many on the conservative side of politics that, although having a government continually and unnecessarily interposing in the market is not a desired outcome, it is a necessary evil when the market has basically lost the capacity to balance itself by natural action.

Especially with the advent of the GST, in the pricing structure of certain items it was expected that there would no longer be the capacity to break up items into particular parts and price them accordingly as a means and a mechanism to confuse the purchaser. There was one exemption, and that was the exemption for postage and handling and for things that were an addendum and clearly identified as away from the product. But more and more people took the liberty of being able to use an extension of this in such a way as to obscure the price. This piece of legislation, I hope, starts to deal with this facet and to bring it back to what was intended by the coalition: to be a clear—and that is why it is called ‘clarity in pricing’—and a better reflection to the community that is involved with the product of exactly what is part of that product. This should be generally supported. The intent of it is well known.

But I hope that it is also just one step of many steps that we have to look at. We also have legislation on creeping acquisitions that will be coming here in the near future. We are already underway on section 51AC, on unconscionable conduct. Changes have been made and instigated, initially by the coalition government, to section 46, on predatory pricing. And all the time we have to go through the balancing act of making sure that we are not overt in the marketplace but we recognise the marketplace to be imperfectly driven by what John Maynard Keynes always believed to be a desire to centralise to a point—and on centralisation to a point comes the loss of those forces that have the capacity to give the consumer an honest price from an honest marketplace.

More and more, a sense of confusion has been brought about by vendors’ greater capacity to break things up in certain ways so that people cannot really compare apples with apples because what they are actually being sold is a stem, a core, a skin and the flesh, and they are all bundled in such a way that people do not quite know what they are buying. The first price is obviously seen as a good price, but, when they have to add up all the other component parts necessary to get the total product, they actually have a very bad outcome. Clarity in pricing is an issue that we hope starts to deal with this factor.

It is going to be interesting to see, as we progress down this path, what further actions have to be taken so that the consumer can readily see what their price is. It is important that the intent that this chamber is showing, especially with clarity in pricing, is also the intent that it shows on other issues that come before it, such as creeping acquisitions. I look forward to the government being honest in their appraisal of creeping acquisitions. I look forward to them being brave enough to deal with what is truly required in creeping acquisitions. When legislation on section 51AC, on unconscionable conduct, comes forward, I hope that in that issue as well we get a sense of proportion to deal with the fact that, as we currently see under unconscionable conduct laws, we have only had two successful cases in 10 years. That tells us quite a bit about the paucity that is currently in the Trade Practices Act.

Hopefully, with a sense of bipartisan consensus, we can move forward on these issues to bring about a better oversight and a capacity for the ACCC to truly stand up as an independent player in this which works on behalf of the consumer, not on behalf of other interests that may be affecting its decisions from time to time. We also hope, in that process of making sure that the ACCC remains the independent champion for the consumer, that we do not have the occasion where senators are threatened with defamation cases to be taken before—I do not know—the High Court because they dare to question. We do not want that. We do not want a situation where certain people are intimating that there might be legal proceedings against them if they dare to question the role of the ACCC.

Obviously I hope this issue is one where we see a clear consensus so that, with clarity of pricing, we offer back to the consumer the sense that the market is not there to deceive, that the market is not there to basically rip them off. Clarity of pricing really takes the legislation to a position where the coalition presumed it was going to be anyhow with the introduction of the GST. The introduction of the GST was supposed to bring forward a form where there would have to be clarity in pricing. It is just by evolving over time that we now see that further legislation is required. I commend this piece of legislation to the Senate. It should not have been required, but it is required. I hope, for what it is worth, that we can at least shelve this issue so that we have a clear deck before we start taking on creeping acquisitions and unconscionable conduct, which I know will have a far greater resonance within the chamber and will probably involve a more heated debate.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I rise to indicate my support for the second reading of the Trade Practices Amendment (Clarity in Pricing) Bill 2008. Borrowing from the title of the bill, brevity is clarity; I do not intend to take too much of the Senate’s time in relation to this bill. I note that a version of this bill was introduced by the previous government and that the coalition supported this bill in its successful passage through the House of Representatives. I think it is important to put on the record a few brief marks about this bill, given my ongoing interest in protecting the rights of small businesses and consumers.

This bill amends section 53C of the Trade Practices Act to require advertisers to present a single-figure price so that consumers know the full amount they will have to pay when purchasing items. Currently, some companies participate in practices which, while not technically illegal, are at best confusing and at worst misleading. Such practices do not contribute to a fair and transparent market where consumers should have maximum choice and small businesses should have every chance to compete fairly. An example that would be familiar to many Australians is that of so-called ‘cheap’ air fares. In what seem like increasingly frequent airfare price wars, we see ridiculously cheap airfares advertised without indication of the associated fees and taxes until after the ticket has been purchased or is about to be purchased. This leaves the consumer in the dark about the true cost of the ticket, which may be far more than those provided by other companies that want to do the right thing by being more transparent in their pricing. Other examples of hidden costs can include on-road and dealer delivery costs for new vehicles and compulsory delivery costs for internet order items such as computers.

This bill will ensure that, when a company makes a statement about the partial price of a good or service, it will also provide the details of the full price. It will do so by making it clear in section 53C of the Trade Practices Act that companies have a responsibility to show component costs in prominent and clear ways. That is good news for consumers, and I commend the government and Minister for Competition Policy and Consumer Affairs, Minister Chris Bowen, for addressing what are clearly deficiencies with the current act. However, there are three matters for which I request clarification from the minister in the committee stage.

Firstly, the bill states that the ‘single total price’—namely, the price paid by the consumer to walk away with the product—must be ‘quantifiable’ for it to be presented. I appreciate that in some cases there will be some fees, charges or costs and that a company will not be able to project all the costs and hence will not be able to provide a single total price. In these cases, will the advertiser be required to state prominently that there is a further charge payable and what the nature of the charge will be even if a specific price cannot be stated—in other words, how will consumers be informed in those cases where it is clearly not practicable and what thresholds are there for the practicability of that being enforced? Where are there reasonable exemptions for businesses in relation to this?

Secondly, while the ‘single total price’ is not required in business-to-business transactions, should the business that bought the product then sell it on to an individual consumer, what requirements will be on the secondary business to present all component costs? For instance, if a company bought an airfare from an airline and then sought to advertise it online, would it be required to disclose all component costs to enable transparency and greater choice for the consumer? Thirdly, I ask the minister what research the department has devoted to the possible compliance costs of these changes, especially for small businesses. What were the findings of this research? That said, I support the broad intention of this bill and will be supporting its second reading.

Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary Assisting the Prime Minister for Social Inclusion) Share this | Link to this | Hansard source

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.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to incorporate Senator Polley’s speech.

Leave granted.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows

The Rudd Labor Government introduced the Trade Practices Amendment (Clarity in Pricing) Bill 2008 to tackle the problem of hidden fees and charges for consumer products. I am sure this bill will be welcomed by Australians because it will provide consumers with a much clearer choice when purchasing products or services.

In these times of global financial stress, this Government understands that every little bit counts when it comes to the family budget.

The bill would amend the Trade Practices Act 1974 to require that where a business makes a price representation to a consumer, and that amount is less than what the consumer will actually have to pay to acquire the goods or services, the business must also prominently state a total price as a single figure. The changes will only apply to all print, television and radio advertisements.

We believe that it is inappropriate 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 Rudd Labor Government believes that businesses that do not provide a total price, for example, those who choose to exclude taxes from their advertised price, may gain a competitive advantage over businesses that provide full price disclosure to consumers. We believe this is unfair to those business’s who do the right thing by their consumers, and this is just one reason why this piece of legislation is so important.

This Government is committed to ensuring that consumers are not given the impression that something is cheaper than it really is—we want to empower consumers to be fully informed about what they buy.

The key features of the proposed changes are:

• Firstly, there will be a requirement for a single price: On enactment of this bill, there would be a requirement to specify the final price as a single figure. This must include all amounts that are quantifiable at the time of advertising. Where the total amount is not known, the minimum price must be disclosed as a single figure.
• Secondly, the price must be prominently displayed: the single figure must be displayed clearly. Also, the single figure must be displayed at least as prominently as the most prominent of the other components of the price. This is because the total amount payable is usually the figure of the most importance to the consumer.
• Thirdly, the new provisions are intended to apply to the advertising of consumer goods only. It is not intended to apply to price representations between businesses or between businesses and government.

An exposure draft of the bill was released for public consultation in March of this year. We received a number of submissions and based on comments received from a range of businesses and consumer advocates, the Government believes the bill will not impose unnecessary compliance burdens on businesses.

Throughout the stakeholder consultation process, it was argued that including postage and handling costs would create additional compliance burdens, particularly for online businesses, for little consumer benefit. We are of the belief that genuine postage and handling costs are a concept that is relatively well-understood by consumers.

Therefore, the bill provides that the charges for sending the goods from the supplier to the consumer do not need to be included in the total prices. However, if the postage cost is known by the business, and postage is compulsory, the provision requires that the business disclose that price in their representation, either as part of the total price or as a separate component.

The Member for Hindmarsh, Steven Georganas, commented in his second reading speech on this matter 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”.

This Government believes that was an irresponsible thing to do. We are simply doing what is fair for consumers. This is yet again another example of the Rudd Labor Government doing the right thing by working families. As Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer, Chris Bowen said in his second reading speech of this bill earlier this year,

“It is fundamental that every consumer knows how much they are going to pay when they make a purchasing decision”.

He went on to say:

“It is not appropriate that additional compulsory fees and charges are disclosed in fine print disclaimers, particularly when those additional compulsory charges may be significantly larger than the component price that is highlighted.”

Gone are the days when consumers have to wonder what fees and charges are going to be added when they actually agree to buy something. This bill gives clarity and certainty to buyers throughout Australia.

The Government, however, understands that in some cases the final price may depend on factors beyond a businesses control, which is why the bill requires the total price to be stated only where a minimum total price is quantifiable at the time of the representation concerned. In addition, the amendments will not apply in respect of financial services, where detailed disclosure requirements already exist. Ultimately, the bill targets misleading “component pricing” practices.

Component pricing is the practice of advertising prices as the sum of multiple component parts, for example as $X plus $Y. Component pricing can create an impression that a product is being offered for sale at a lower price than it actually is.

The Australian Government received legal advice in 1999, in the context of the introduction of the Goods and Services Tax (GST) that section 530 of the Trade Practices Act required displayed prices to include any GST payable.

Implicitly, it was understood that Section 53C would also prohibit other forms of component pricing (eg price representations which exclude compulsory ‘taxes, fees and charges’, ‘levies’ or `surcharges’), unless a single figure price was also specified. The Government considers that consumers should be able to readily identify the price they will pay for a product or service. This enables consumers to easily compare prices between like products or services and make informed purchasing decisions.

This is a measure that should have been implemented a long time ago. We, as a Government, do not want to see consumers fall into a trap of being forced to buy something at a price higher than they were expecting. This bill amends the Trade Practices Act to prohibit corporations from using a component price when making a representation as to the price of a good or service. Businesses must prominently specify the single figure price a consumer must pay to obtain the product or service, to the extent that a single figure price is quantifiable at the time of making a representation.

This bill does not prohibit component pricing, provided that a single figure price is also displayed. The limitations on the use of component pricing imposed by the bill would not apply to representations made exclusively by businesses to other businesses or governments.

The changes are intended to protect consumers from misleading advertising. A common example of component pricing is evident when one buys an airline ticket, particularly online.

Airlines often offer cheap rates in their advertisements; however, once you add up the additional taxes, credit card fees and additional baggage fees, a consumer may discover they have no saved any money at all. This certainly is an irritating experience.

Other consumers may be lured into looking at cut price vehicles, unaware that the price advertised does not mention the on- road costs. This bill seeks to clarify these issues. It is the fair thing to do. It will protect Australians and ensure they can shop around for a fair deal without having to stop to read the fine print.

The Australian Competition and Consumer Commission received 430 complaints over confusing component pricing last year. In addition, Consumer Affairs Victoria has received around 250 complaints so far this calendar year. Many other consumers were likely misled, but did not complain to a regulator. This bill signifies The Rudd Labor Government’s commitment to the protection of consumers. This clearly is a government for all Australians.

Tony Zappia, the Member for Makin, commented in his speech on this bill that “Consumers look to government for protection in relation to their purchases, and both State and Federal governments have a responsibility in consumer law. As we all know, consumers do not always read or understand the fine print that often accompanies purchase agreements”. He is quite right. That is why I am pleased that the Rudd Labor Government has put this piece of legislation up for debate. I believe it is quite overdue.

Mr Zappia went on to say, “The vast majority of businesses that operate ethically will have no objection to these changes; in fact, they will welcome this bill, because it will probably weed out the rogue operators from within their industry. The consumers, however, will certainly benefit from this bill because it provides clarity and certainty in how much a good or service will actually cost them”.

The Rudd Government is delivering on another important pro-consumer reform that the previous government never had the courage to push ahead with.

Chris Trevor, the Member for Flynn correctly noted in his comments on this bill that:

“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 trained in the law often say, the devil is in the detail.”

The Government understands that the average mums and dads in our community are not lawyers. We also understand and recognise that mums and dads, the working families of Australia, do not have time to sit down and make complex comparisons between products and their prices. The Government is serious about empowering consumers and strengthening the consumer’s right to know the total price of a good or service. No longer will consumers feel ripped off when they suddenly discover that what the thought they were paying doesn’t take into account hidden taxes and charges.

These reforms will mean that consumers will know the total price they will have to pay for goods and services that they buy. The government is not interested in placing an undue burden on business or trying to fix a problem that doesn’t exist. The proposed bill represents a much welcome 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. Once this bill is passed, I will be proud to go back into my community and tell my constituents that comparing prices for goods and services will now be easier.

To me, this legislation is all about giving a fair go to consumers. A fair go for all is a value that has never gone out of fashion in this country. At the same time as giving a fair go to consumers, the Government has made an effort to ensure this will not affect businesses too much. We have struck the right balance. I request those opposite vote in favour of this legislation to help the working families of Australia be able to make good purchasing decisions. No Australian consumer deserves to be ripped off by unscrupulous business owners. Consumers should not be lured into buying a product or service and then slugged with additional costs. This is a good move by the Government and I commend this bill to the Senate in its entirety. I encourage those opposite to do the same.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to incorporate Senator Sterle’s speech.

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

Is leave granted?

Concetta Fierravanti-Wells (NSW, Liberal Party, Shadow Parliamentary Secretary for Immigration and Shadow Parliamentary Secretary Assisting the Leader in the Senate) Share this | Link to this | Hansard source

I understand that we have not seen a copy of that speech.

The Acting Deputy President:

Okay. Perhaps it is better if you move that motion later on, Senator McEwen.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I will.

(Quorum formed)

Question agreed to.

Bill read a second time.