A lot of reports have been swirling around as of late, concerning the changes to the Trade Practices Act in relation to product pricing. Restaurants in particular have been mentioned quite heavily, with restaurants who charge a weekend surcharge now being made to print two different menus – one with their weekend price and one with their Monday to Friday prices. Why is this relevant to your business and how will it affect the way you do business?
Changes to how businesses must represent their prices
So what are the changes and how will they affect the way you run your business? First up is what is called “Component Pricing”. This is where you present only a component of the price to customers rather than an all-inclusive single amount. Under the new act, this is no longer permitted if you sell consumer goods or services to individuals and you are not in the financial services industry. For example if you advertise a car for sale for $20,000.00 and include in the fine print that this excludes dealer and statutory charges; this is no longer permitted. The changes to the law mean you must now state the minimum total cost that is able to be quantified.
So can you still include the individual components? In short, yes. But the amount must not be in the fine print. You can still say a product costs $500 plus $50 GST but the $550.00 total price must be prominently displayed i.e. not in the fine print.
The amounts that you must include are anything that a consumer is liable to pay for which can be quantified. This would include such things as administration fees, compulsory service charges, booking fees and any taxes, duties, fees, levies or charges payable by the consumer such as GST.
If for some reason it is not possible to include all components of the price because they are not known at the relevant time, then it is acceptable to leave out the ’unknowns’ but you must state that some components have not been included. You do not have to include for example, charges that are payable only at the option of the customer and delivery or sending charges including postage, courier fees and packaging charges which may be displayed separately. If the minimum delivery charge is known however, then this must be displayed separately.
What if customers pay for my goods by way of periodic payments?
If goods only are supplied where payment is by for example monthly payments, then the total amount payable must also be stated. If by contrast you are supplying services, and goods which are related to those services, under a contract (for a term) that provides for periodic payments; then the periodic payment figure for example $80 per month can be displayed more prominently then the $960.00 they will end up paying in total.
What are ‘consumer goods’?
These new laws only apply if you sell your goods or services to individuals, not companies or where your goods or services are ‘ordinarily acquired for personal, domestic or household use’. As mentioned above, financial services are also excluded.
What should you do?
Don’t just change the equivalent of your menu/product prices shown to customers. All company documentation where prices are mentioned should be reviewed to ensure the prices are correctly represented. This would include such things as contracts, quotes and tenders. Advertising should also be reviewed plus staff should be provided with guidance as to how to advise customers as to what the price of a good or service is as oral representations are also caught.
Given this change is in the Trade Practices Act, if your organisation has a Trade Practices Compliance Manual this should be reviewed and updated to include this change to the law.
If you fail to comply with these new laws then you are in breach of the Trade Practises Act and will be penalised. This can include paying compensation, corrective advertising plus fines of up to $1.1 million for corporations and $220,000 for individuals. So, make sure the price is right!
Kerry-Ann Aitken is a Principal for Outsourcedlaw www.outsourcedlaw.com.au
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