On 11 November 2008, the Federal Government passed the Trade Practices Amendment (Clarity in Pricing) Bill 2008 (Bill).

The Bill amends the Trade Practices Act 1974 (TPA) so that if a business makes a price representation which is less than what the person will actually have to pay to acquire the goods or services, the business must also prominently state the total price payable. The intention of the Bill is to 'tackle the problem of hidden fees and charges' and 'give clarity and certainty' to buyers.

When will the Bill come into effect?
The component pricing aspects of the Bill will come into operation on a day to be proclaimed, no later than six months after the Bill is given Royal Assent.

Component pricing amendments
The Bill replaces section 53C¹ with a new section to prohibit corporations from using component pricing when making price representations unless it also 'prominently' specifies, the 'single figure' price the person is required to pay for the good or service (to the extent that a single figure price is quantifiable at the time of making a representation). Corresponding amendments are proposed to be made to the criminal offence provisions of the TPA.

How does the new section 53C apply?
The proposed section 53C will apply to any representation made to a person in connection with the supply or promotion of goods and services that are of a kind ordinarily acquired for personal, domestic or household use or consumption. To that extent, it captures representations in relation to the supply of 'consumer' type goods or services.

The section will not apply to representations made solely to a 'body corporate'. The Explanatory Memorandum explains that section 53C is intended, in effect, to only capture representations made to persons not engaged in business or other activities through a corporate structure, that is consumers. However, the section will apply in circumstances where the representation is made to both consumers and business.

Can I still use component pricing?
A business may still use component pricing, however, they must also 'prominently' specify the total single price as a single figure. For example, prices may be advertised as '$79 + $35 taxes, fees and charges for a total price of $114'.

Single price
The 'single figure' should be an aggregate of all of the components in the 'single price' (defined as the minimum quantifiable consideration for the supply at the time of the representation).

The Explanatory Memorandum defines the term 'quantifiable' as a total price that can be readily converted into a dollar amount. The Explanatory Memorandum suggests this would cover mobile phone contracts (where the aggregate minimum amount the consumer must pay over the life of the contract can be quantified), but would not cover contracts where a price is quoted and is agreed to be calculated from the supplier's actual costs and an agreed percentage or fee (since the final total price will not be known until the supply is completed).

Where the total price includes quantifiable and non-quantifiable amounts (such as a mobile phone contract), the charges that are quantifiable should be represented in the single price. It may also be necessary to clarify that not all components are included in the single price to avoid breaching other provisions of the TPA.
The single price must include:

• charges of any description payable by the consumer to the corporation making the representation (other than a charge payable at the consumer's option, such as optional fabric protection for a couch);
  
  
• the amount of any tax, duty, fee, levy or charge - imposed on the corporation making the representation - in relation to the supply. The Explanatory Memorandum clarifies these amounts need only be included in the single price if they form part of the consideration for the supply of the goods or service (i.e. where they are passed on to the customer in the price that must be paid). Charges a corporation must pay to a third party in relation to the supply but that are not passed on to the customer in the price payable need not be included. Similarly, a tax imposed on the customer in relation to the supply where that tax is paid directly by the customer to the taxing authority need not be included; and
  
  
• any amount payable by the corporation making the representation in relation to the supply with respect to any tax, duty, fee, levy or charge if that amount is payable under an agreement or arrangement under legislation and would have otherwise been payable by the consumer (for example, the passenger movement charge).

What about where the price depends on the quantity of goods or services purchased?
While the Bill does not specifically address how businesses represent a price where the total price of goods or services depends on the quantity acquired, the Explanatory Memorandum states the 'single price' should be specified as a 'per quantity' amount. For example, fruit and vegetables can continue to be advertised at a 'per kilo' price.

What does 'prominently' specify mean?
The single price must be at least as prominent as the most prominent part of the price. Specifying the single figure price in the fine print of an advertisement will not satisfy this requirement.

There is an exemption for contracts (such as mobile phone contracts) that are for the supply of services for the term of the contract, which also provide for periodic payments and, where goods are also supplied under the contract which are directly related to the services. This allows for the disclosure of the periodic component of the total price to be displayed more prominently than the total price over the life of the contract.

Are there any exclusions?
Charges relating to sending goods from the supplier to a customer (e.g. postage and handling) are excluded from the general requirement to include all components in the single price. For example, prices may be stated as $30 + $5 postage and handling. However, where a corporation knows the amount of the charges that must be paid by the customer, the corporation must either disclose the minimum amount of those charges as a separate component of the price or include it in the total price.

The new section 53C will not apply in respect of financial services.

Issues for the automotive industry
The new section 53C raises particular issues for the advertising of motor vehicles which will be addressed separately by our automotive practice group.

Copies of the Bill, Explanatory Memorandum and Second Reading speech are available from the  Commonwealth Parliament website.